Low-End Servers Slide Into Commodity Status, Reports IDCLow-End Servers Slide Into Commodity Status, Reports IDC

In stark contrast to healthy growth at the high end, growth in the x86 (i.e., low end) server market slumped during 2Q08, leading market research firm IDC to conclude that the low-end is becoming a commodity market. That, unfortunately is not entirely good news for buyers.While worldwide factory revenue for the leading server vendors rose 6.4% year-over-year in 2Q08 (to $13.9 billion) the x86 (i.e., low end) of the market saw its slowest rate of growth in 23 quarters (i.e., since 3Q02) with a growth rate of only 3.2%, IDC reported.

The market may also have experienced a sort of tipping point during 2Q08 since it was the first quarter since the end of 2000 that the growth of spending on non-x86 systems rose faster than spending on x86 systems. Average selling prices for x86 systems fell 8.4% year-over-year, shaving profit margins for the vendors. To IDC, it all spelled a possible market slowdown on the horizon, as enterprises tightened their budgets further.

Yet, in terms of actual units sold, the x86 server market looked perfectly healthy, with shipments up 12.4 percent, to 20 million units.

Hewlett-Packard led the x86 market with 33.9% of the revenue, with Dell claiming 24.7% and IBM getting 16.3%.

The report drew the conclusion that the x86 server market has become a commodity market, especially one-socket and two-socket systems. While a commodity market usually means great prices for buyers, it also typically means that vendors stop developing new features to differentiate their products, there being no point in doing so.

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