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Dell’s server strategy paying off

The decline in PC spending has hit Dell hard, but the company’s server business is growing, said IDC in its first quarter report on the worldwide server market.

Dell’s share of worldwide server revenue reached 18.5 percent in in the first quarter of this year, up from 15.5 percent a year ago.

Cisco is another winner in IDC’s quarterly report, released on Wednesday.

Cisco entered the server market in 2009 with its Unified Computing System, a virtualised platform that combines servers and networking. It now holds 4.1 percent of the worldwide market, up from 2.8 percent in the year-ago quarter, reported IDC.

Cisco and Dell grew despite an overall 0.7 percent decline in worldwide server shipments, said IDC.

Jed Scaramella, an analyst at IDC, said that despite the first quarter statistics, the overall server market isn’t shrinking.

Enterprises now are more likely to increase capacity of existing infrastructure than add new servers, he said. “People are continuing to consolidate their environments,” Scaramella said.

Dell has had success selling servers to service providers because of its focus on building high-density systems, Scaramella said. Hosting companies, data centre operators, cloud hosting providers and Web services firms make up a major market for Dell, he added.

Dell moved into the microserver market early, touting the technology because it contends that Wall Street measures hosting providers by the amount of revenue generated per square foot of data centre space. Up to 12 microservers can be put into a 3-U rack.

For enterprise vendors, HP and IBM in particular, they still have a majority of the world’s market share, but it was a rough quarter. HP was at 26.9 percent market share in the first quarter, compared to 29.2 percent in the year ago fiscal period.

Similarly, IBM dropped to 25.5 percent from 27.2 percent in the quarter.

First quarter server sales are typically weak, as buyers slow down after a year-end ordering rush. The Unix market, important to both IBM and HP, declined in revenue by nearly 36 percent in the first quarter.

Scaramella said the server market is growing overall, calling the first quarter decline a seasonal one. He projects mid-single digit growth in the coming quarters.

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