Apple is scrapping is Xserve products, according to the latest information on its web site:
Xserve will no longer be available after January 31, but we’ll continue to fully support it. To learn more, view the PDF.
If you do indeed view the PDF, it confirms that:
Apple will not be developing a future version of Xserve
However, the Snow Leopard Server, a version of OS X tuned for server use, remains; and Apple suggests that you install it either on a Mac Pro or on a Mac Mini.
That’s all very well; but while a Mini might well make sense for a very small business, larger organisations will not be impressed by the lack of features like dual redundant power supplies, lights out management, and rack mounting, which the Xserve provides.
There are a couple of ways to look at this. One is that Apple is giving up on the server market. Largely true, I think; but my guess is that Apple realises that this type of on-premise server is under threat from the cloud. I do not see this as Apple giving up on corporate computing; that would be unexpected considering the gains it is making with Mac, iPhone and iPad. I do see this as a move towards a client and cloud, or device and cloud, strategy. In that context it is not so surprising.
That said, I imagine there are a few businesses out there focused on supplying Xserve-based systems who will be disappointed by the news. I’ve not used one myself; but from what I’ve heard it is rather good.