Server Sales, A Proxy For IT Spending, Take A Hit (HPQ)(IBM)(DELL)(INTC)(AMD)

A drop in server sales is bad news for companies that build them including HP (HPQ), IBM (IBM), and Dell (DELL) and the firms that supply chips–AMD (AMD) and Intel (INTC). But, it is also grim news for the entire IT industry.

According to The Wall Street Journal, server sales in the first quarter were abysmal. “Worldwide server revenue fell 24.5% during the quarter, which is the biggest annual percentage drop since IDC began tracking server sales in 1996.”

The figures are a clear indication that corporations are cutting their tech costs to the bone. That, in turn, says that many companies do not see their sales improving and need to chop whatever costs they can. Server sales may not be a good measure of the corporate economy as a whole, but they are an excellent way to view the extent to which tech spending, one of the largest costs of many large companies, is still being undermined by the recession.

If the Q2 IDC figures are as bad as they were in the first quarter, a recovery in corporate earnings may still be a way off.

Douglas A. McIntyre