FRAMINGHAM, MA -  Worldwide server revenue grew 5.3% year-over-year to $12.1 billion in the first quarter, the eighth consecutive quarter of growth, research firm IDC said today.

Volume server revenue grew 15.6% year-over-year and continues to represent the primary growth engine for the server market overall. Revenue for midrange enterprise servers grew 6.1%, the second consecutive quarterly increase in that segment. IDC believes this may reflect increased IT spending to run more scalable workloads and consolidation initiatives than can be deployed onto volume servers.

Conversely, the high-end enterprise server market, which grew from the fourth quarter of 2003 through the third quarter of 2004, declined 13.9% year-over-year, its second consecutive quarter of reduced spending. One factor in this drop could be continued price compression, which reduces average sales prices for servers from the high-end enterprise into the midrange enterprise space.

"While the market is not accelerating at the same pace that it did in 2004, IT spending remained strong in the first quarter as customers continued to invest in new infrastructure," said Matt Eastwood, program vice president of worldwide server research at IDC. "Although scale-out computing continues to gain favor with customers for an increasing variety of workloads, increased spending for midrange enterprise systems indicates that other form factors continue to be attractive for large, monolithic applications and for consolidation workloads."

IBM held on to its top ranking as HP moved into a statistical tie in the worldwide server systems market with 28.3% and 27.6% factory revenue share, respectively.
Dell and Sun tied for third place in factory revenue with 10.8% and 9.9% share ,respectively. This is the third consecutive quarter that Dell and Sun have been within one point of market share as Dell experienced 16.6% year-over-year revenue growth while Sun's revenues increased 2.7% when compared to 1Q04.
In terms of unit shipments, HP maintained its number 1 position worldwide with 30.4% server shipment share. Dell maintained the number 2 spot in terms of worldwide server shipments with 24.5% share, growing shipments 17.4% compared to 1Q04.

Although demand for x86 servers continued to be strong, growth has moderated. Factory revenue grew 13.2% to nearly $5.8 billion worldwide while unit shipments grew 14.2% to nearly 1.5 million servers worldwide. Dell, HP, Fujitsu/FSC and Sun all outpaced the category's growth rate, posting year-over-year revenue growth in excess of 15%.

"The volume ramp of x86-64 servers continued in the first quarter, on a worldwide basis. HP was able to leverage the ramp of its AMD Opteron-based servers to become the only tier 1 vendor in the lucrative 4-way x86 server segment to grow revenue year-over-year," said John Humphreys, research manager of IDC's Global Enterprise Server Solutions. "The gain in 4-way x86-64 servers indicates that enterprises see strong performance and scalability benefits from Opteron-based systems in their data centers."

The server blade market showed continued growth in the quarter, with shipments increasing 68.2% over a year ago and factory revenue gaining 106% year-over-year. Overall, bladed servers accounted for $409 million in the first quarter, representing 3.4% of quarterly server market revenue. IBM maintained the No. 1 spot in the server blade market with 39.2% share, while HP maintained the No. 2 position with 35.2% share. Dell was able to increase its share of the blade market to 9.4% in Q1.

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