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The market for computer systems is actually two very different markets. One of them is turning north with a vengeance, while the other still hasn't found its rock-bottom level.
The good one is the sub-market for consumer systems. The average American shopper has been nosing around the gadget department of the local electronics superstore lately, loading up on cheap but powerful desktops, laptops, and netbooks. That sector is well on its way back to full health after last year's panic attack.
But according to IT research shop IDC, the market for business-sized server systems is still in free-fall mode. The sector as a whole saw 30% lower sales last quarter when compared with the year-ago period. IDC started following server sales in 1996, and has never before seen a quarter as weak as this quarter's $9.8 billion.
The news is uniformly bad across every vendor, system architecture, and size of systems. IBM (NYSE: IBM ) and Dell (Nasdaq: DELL ) picked up some overall market share, while Sun Microsystems (Nasdaq: JAVA ) lost some clout instead. Hewlett-Packard (NYSE: HPQ ) is still the biggest seller of servers built around chips from Intel (Nasdaq: INTC ) and Advanced Micro Devices (NYSE: AMD ) , while Big Blue is No. 1 in Unix systems and non-Intel servers. And in all of these segments, sales fell by anywhere between 25% and 35%.
If there is one sign of strength in the server market, it would be in blade servers. That product category, which packs enormous amounts of computing power into a tiny physical footprint, declined only 12% year over year. Since unit shipments fell 20%, the going price per blade system actually increased. HP is the leader in this promising niche with a 53% market share, with IBM a distant second. But since blade servers are very well suited for running huge computing clouds of virtual machines, the real winner here might be virtualization market leader VMware (NYSE: VMW ) .
In short, the biggest loser in the server space is Sun, while HP, IBM, and VMware all appear poised for a powerful rebound. Corporations everywhere are sitting on a truckload of aging servers that are due or overdue for an upgrade, just waiting for a refreshed budget or hardware failure to motivate some fresh hardware buys.
Was this quarter the absolute bottom of the server market? Maybe not. But I'm convinced that we are definitely scraping the bottom pretty tightly, and will have to come up for air within a quarter or three. This should be an awesome time to buy stock in the winning enterprise computing giant of your choice.