HP, IBM Bruised By Sluggish Server MarketHP, IBM Bruised By Sluggish Server Market

The worldwide server market suffered a 7.7% drop in factory revenue in the first quarter of this year, according to a report published Wednesday by research firm IDC. Revenue dropped for the fifth time in the last six quarters, pulled down by not only economic forces but also a shift toward more efficient and agile data center technologies.

The report follows similar conclusions released earlier this week by Gartner.

HP claimed the leading position, snaring 26.9% of the market's total factory revenue, but the news was still mostly bad for the company. Its 14.8% downtick in revenue was almost twice as severe as the industry's already-lousy overall average, and its revenue share was down from Q1 of last year, when it held 29.2% of the market. IDC attributed the losses to diminished interest in HP's x86-based ProLiant servers, which have ceded territory to more aggressively priced competitors.

[ Sluggish sales can't dim HP chief's outlook. Read HP CEO Whitman Keeps Calm, Carries On. ]

The research firm also singled out weak demand for HP's Itanium-based, mission-critical servers. One of the only products that uses Intel's Itanium chips, the servers' future has been in doubt in recent years, a period during which they've lost ground to more-prominent x86 systems. Itanium servers also played a central role in a contentious HP-Oracle lawsuit. Despite this history, HP has continued to express confidence in the platform's longevity.

IBM was second, with 25.5% of the market, down from 27.2% last year. IDC blamed the company's 13.4% revenue drop on decreased demand for not only Power Systems servers, which compete with HP's Itanium systems, but also the x86-based System x line.

In third place, Dell was arguably the market's best performer. The company, embroiled in falling PC sales and buyout drama, claimed 18.5% of all factory revenue, up from 15.5% during the same period last year. The company's revenue was up 10.1%.

Dell's success was driven in part by exploding demand for density-optimized hyperscale servers, which are used in data centers.

Fujitsu, Oracle and Cisco landed in a statistical tie for fourth place. For the first two companies, the news is dispiriting; Fujitsu's factory revenue was down 8.5%, and Oracle's was down 26.2%. For upstart Cisco, though, revenue increased 34.9%, partly on the strength of blade server revenue.

In a statement, IDC analyst Matt Eastwood noted that tough economic conditions contributed to the sluggish market. He pointed out that, with the exception of the Asia/Pacific region, every geographic territory recently suffered revenue contractions.

But IDC concluded that technological forces were at work as well. Revenue from data-optimized servers was up 54.8%, for example, and unit shipments were up 39.3%. The category now represents 11.2% of all server shipments. IDC estimates that Dell commands 47.3% of the revenue in this space, whose popularity has risen as cloud-based deployments have increased.

The demand for Unix servers, meanwhile, declined 35.9%, its seventh consecutive quarter of drops.

Microsoft Windows Server remained the top server platform, controlling just over half of all factory revenue. Though Redmond has begun to divulge information about Windows 8.1, little is known about Windows Server 8.1. There are indications, however, that Microsoft plans to reveal information during its TechEd Conference, which will take place in New Orleans during the first week of June.