Disk Arrays Sales Down in Q4; IBM Slammed

Published: March 16, 2009

by Timothy Prickett Morgan

On the disk storage front, Moore's Law has barely been able to keep up with the appetite for capacity since the disk drive was invented in 1956. But in the fourth quarter, it looks like Moore's Law caught a breather as sales for external disk arrays declined for the first time in more than four years. According to a report released by the box counters at IDC last week, disk array sales across all sizes and types accounted for $7.3 billion in sales in the final quarter of 2008, down 5.9 percent. Proving that even disk storage is not immune to an economic downturn.

IDC reckons that the total capacity shipped by disk vendors in Q4 2008 rose by only 27.3 percent to 2,460 petabytes. (That rounds to 2.5 exabytes, a term I guess we should all start getting used to now.) Just to give you a sense of how 2008 was different from 2007, as we reported a year ago, disk array revenues were up 7.6 percent to $7.5 billion and the total disk capacity shipped was up 56.3 percent to 1,645 petabytes. When you do the math on that, the average price of a gigabyte of storage has fallen by nearly 35 percent in a year, and storage makers have tried in vain to make it up in volume. Imagine what happens when storage virtualization and thin provisioning really kick in?

"Because of the global economic crisis, the last quarter of 2008 was tough for the disk storage systems market, resulting in a market decline from the same quarter last year," explained Natalya Yezhkova, the research manager for storage systems at IDC who puts together the numbers. "The negative impact, however, varied among market segments. For instance, high-end storage was impacted negatively by a freeze in end-user spending and longer purchasing cycles; but some low-end and midrange storage segments actually increased as end users broadened their search for storage solutions in these lower-cost segments to satisfy their increasing storage needs while optimizing investments in storage infrastructure."

Over all types of disk array sales, IBM lost out its leadership position, with sales dropping by 22.7 percent to $1.31 billion in the quarter. Hewlett-Packard, by contrast and thanks in part to better-than-market sales (meaning it still declined) for internal disk arrays sold in servers, took the top spot, with $1.43 billion in sales, down 1.5 percent. EMC, which is the market leader in external disk array sales and which does not have a server business into which it can sell internal disk arrays, posted $1.24 billion in sales, up 3.4 percent. Dell, thanks to its acquisition of EqualLogic and its ongoing partnership with EMC to resell low-end arrays, declined by only 3.4 percent to $795 million in the four quarter of 2008. Hitachi, which creates very well regarded midrange and high-end external disks (that are also resold by Sun Microsystems), sold some $424 million of arrays itself under its own brand, seeing 4.2 percent revenue growth in a down market. Sun, which has been pitching so-called "open storage" arrays based on Solaris Unix, its Zettabyte File System, and commodity motherboard and disk components, was able to decline less than the market at large as well, with sales down only 1.5 percent to $419 million. Other vendors accounted for $1.64 billion in sales, down 4.4 percent.

What IDC didn't say, and what it probably should have given that only two weeks ago it said that server sales had declined in Q4 by 14 percent to $13.5 billion and shipments were off 12 percent, is that the real hurt put on the storage space was because server sales were down and that means fewer internal disk arrays go out the door. By my math (subtracting external disk array sales from total array sales), internal disk array sales across all vendors fell by 18.1 percent, to $1.94 billion. (I have no idea how the petabytes split on internal versus external arrays.) As we know, IBM's System x and Power Systems i businesses took it on the chin and they tend to use internal disks at SMB shops, so it is no surprise that IBM's internal disk array sales were off a staggering 37.1 percent in Q4, to $472 million. That's more or less in synch with System x and Power Systems i declines. Dell's internal disk array sales were off 19 percent to $302 million. HP's internal disk array sales were off only 7.4 percent, to $739 million, and Sun actually saw 20 percent growth to $144 million.

In terms of architecture, iSCSI-based storage area networks are seeing phenomenal growth, up 61.6 percent in the quarter, and that is because some companies are looking for cheaper alternatives to Fibre Channel-based SANs.

"Although network storage continued its steady growth in the fourth quarter, Fibre Channel SAN saw a downturn, falling 3.2 percent year over year," said Liz Connor, research analyst for the disk storage system tracker service at IDC. "End users are looking for more economical ways to meet their growing storage needs as many IT budgets shrink due to the current economic conditions. FC SAN systems fulfill many high-end storage needs, but usually at a higher average price. However, iSCSI and NAS storage solution alternatives offer increased enterprise-level features at lower costs, and compel vendors to consider these technologies. Continued end user education, growing confidence in IP-based storage, increasing product sophistication, as well as a typically lower price point, result in increased adoption of iSCSI and NAS by many budget conscious end users."

External disk arrays of all types accounted for $5.32 billion in sales in Q4, down five-tenths of a percent. Network disk storage--by which IDC means network-attached storage as well as something it calls open SAN--accounted for $4.1 billion of this, and had 3.6 percent revenue growth in the final quarter of 2008. EMC, with its focus on external arrays, dominates this category with its $1.24 billion in sales. IBM came in second place, with $838 million, but Big Blue's sales were down 11.3 percent. HP managed some growth here, thanks to rebounding midrange EVA disk sales (these are made by HP, not Hitachi) and posted sales of $691 million, up 5.8 percent in this category. Dell, mainly because of EqualLogic, got 10 percent growth in the quarter for external arrays, to $493 million, and Hitachi grew 3.5 percent peddling its own products under its own brands, to $413 million. NetApp, the juggernaut of the network-attached storage segment it helped create, is being swamped by competition, and its sales dropped by 5.4 percent to $374 million. And Sun's external array revenue declined by 10.1 percent, to $275 million, and I think it is because its high-end Hitachi arrays are being moved out of the spotlight and the "Amber Road" 7000 series storage arrays are being pushed hard instead. That's what I would do if I were Sun.

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