Server sales post first decline since 2002-IDC

SAN FRANCISCO, Dec 3 (Reuters) - Worldwide computer server sales declined in the third quarter for the first time since 2002, research group IDC said Wednesday, as corporate technology spending continued to dry up.

Revenue fell 5.2 percent to $12.6 billion, while significant price competition helped overall shipments rise 2.8 percent, IDC said. Servers are beefier business computer systems that run networks and corporations, as opposed to standalone machines by individual users. The figures were in line with those released on Monday by industry tracker Gartner Inc, which reported a 5.4 percent decline in server revenue.

IDC analyst Jed Scaramella said the fourth quarter is shaping up to be even worse and said he doesn't expect a rebound in 2009. Server revenue had been growing at a steady rate of around 3 percent a year.

"People are putting off any any unnecessary spending and their tightening their IT budgets."

Hewlett-Packard Co (HPQ.N) and IBM (IBM.N) -- although both saw server revenue decline -- were in a near dead heat as market share leaders. HP held 30.7 percent of the market with $3.86 billion in sales, and IBM 30.2 percent with $3.8 billion. Dell Inc (DELL.O) was in third with a 12 percent share, followed by Sun Microsystems (JAVA.O) with 9.5 percent.

One of the few bright spots in the quarter were IBM mainframe sales, with its System z servers seeing strong revenue growth.

Meanwhile, x86 servers, based on microchips such as those found in standard personal computers, posted their largest year-over-year revenue decline in eight years, falling 6.6 percent.

"I think it's the small x86 systems that will bear the brunt of the bad news, and people will definitely try to do more with less," Scaramella said. (Reporting by Gabriel Madway; Editing by Bernard Orr)