Server and Storage Array Sales Rebound in Q1, Says Gartner

June 14, 2010 Timothy Prickett Morgan

After a dismal late 2008 and early 2009, the server and storage arrays markets are starting to perk up a bit in the first quarter, according to the box counters at Gartner. It may take years to climb out of the hole in hardware spending that the Great Recession created, but at least the global economy seems to be getting up off the ground and moving forward.

Gartner’s server gurus estimate that in the first quarter of 2010, worldwide server revenues rose by 6 percent, to $10.75 billion, and server shipments were up an astounding 23 percent, to 2.12 million units.

“We’ve seen a return to growth on a worldwide level, but the market has not yet returned to the historical quarterly highs that were posted in 2008, and there were some interesting variations in that growth,” explained Jeffrey Hewitt, research vice president at Gartner, in a statement accompanying the estimates the market researcher cooked up. “Emerging regions that were expected to grow, such as Asia/Pacific, forged ahead, while some mature markets, such as the U.S., produced better-than-expected results, as other countries and regions had a ‘mixed bag’ of results.”

Hewitt said that sales of X64-based servers were what really propped up sales and shipments in the first quarter, with revenues up 32.1 percent to $7.18 billion and shipments up 25.3 percent to 2.06 million units. It looks to me like people are buying fatter X64 boxes to virtualize, which stands to reason since the majority of servers out there in the data centers and data closets of the world are vintage boxes with single-core or dual-core processors with dubious or no built-in support for server virtualization. It would be a surprise, given the stabilizing economy, if companies that had slammed on the spending brakes for X64 servers starting in the fourth quarter of 2008 didn’t start upgrading boxes as the economy began to recover in Q1 2010.

RISC/Itanium boxes running Unix took it on the chin thanks to product transitions at IBM and Hewlett-Packard and issues surrounding Oracle‘s acquisition of Sun Microsystems. Unix revenues in Q1 were down 26.9 percent to $2.15 billion and shipments were off 28.5 percent to 46,117–and that was against easy compares. Mainframe sales fall into the “Other” category, and while Unisys had a comparatively good first quarter for its ClearPath mainframes, IBM’s System z customers are awaiting the z11 boxes and their hybrid Power and X64 engines and are only spending when they have to. Revenues for the Other server category fell 15.1 percent in the quarter, according to Gartner.

Like IDC, Gartner is declaring that HP is now the top of the charts in Server City when ranked by revenues. (HP has been the top server shipper since it acquired Compaq nine years ago.) Gartner reckons that HP accounted for $3.39 billion in server sales in the first quarter, up 15.9 percent. IBM, on the other hand, saw revenues dip by 2.1 percent to $3.05 billion. Dell was ranked in its traditional third place in the rankings, with a stunning 35.5 percent recovery to $1.67 billion in X64 server sales (the only kind Dell peddles). Because of the uncertainty surrounding the Oracle acquisition and the future of Sun’s server product lines, sales of boxes bearing the Sun label fell by a gut-wrenching 38.7 percent in Q1, to $597.9 million, pushing Oracle down into the fifth position in the worldwide revenue rankings. Fujitsu, by squeaking out 7.8 percent revenue growth as it rode up the X64 wave and rode down the Unix crash, shot past Sun to the fourth position in the rankings, with $645.3 million in revenues. Other vendors accounted for just under $1.4 billion in revenues for the quarter, up 7.8 percent.

The days when disk storage array revenues grew at 30 percent and capacity grew at 60 percent each year are long gone, thanks to competition and innovation allowing companies to store more data with less iron and money, but the disk array business is still vibrant and healthy. In the first quarter, Gartner believes that global sales of external disk arrays (those that have their own controllers embedded in them) rose by 18.3 percent, to $4.49 billion. External disk array sales crashed very hard last year, so the growth rates for some vendors are exceedingly high this quarter. Sales in North America were up 25.5 percent across all vendors, and all other regions except Japan had double-digit revenue growth for these products. Revenues for block-level storage devices came in at $3.6 billion in revenues in Q1, flat compared to the first quarter of 2008 when the market was still doing OK. So this remains a very tough and competitive space. Sales of file-level storage arrays jumped 42.4 percent to $846.5 million compared to the first quarter two years ago.

In general, clustered disk arrays are winning out over more expensive monolithic arrays. This sound familiar to anybody else?

By vendor, EMC widened the gap between itself and IBM thanks to its acquisition of Data Domain, with sales up 37.5 percent to $1.22 billion; Data Domain was $124.6 million of that extra revenue. IBM had a revenue increase in disks of 23.3 percent, to $527.3 million, and the growth was driven in part by those funky XIV clustered disks Big Blue acquired two years ago. Without Data Domain, EMC would only be marginally ahead of IBM in terms of growth in Q1, but without XIV, IBM would have fallen further behind. So there. NetApp had an impressive 44.8 percent growth, to $469.1 million, and it did it without acquisitions and by getting its product line and sales act together.

Dell, thanks to its EqualLogic clustered arrays (also acquired) and its ongoing partnership with EMC (where it makes some of the Clariion drives it sells) had 25.7 percent growth in the quarter, to $437.6 million. HP has been struggling in external storage since buying Compaq, but held on to the number five position, up 11.9 percent in Q1 to $416.4 million. (HP sells a load of internal disk arrays with its ProLiant rack and tower servers, which are not counted in these figures.) Hitachi, which lost its reseller deal with Oracle during the quarter, had only 1.2 percent growth, to $408.5 million. Sales to Sun Microsystems, which slapped its label on the Hitachi monolithic arrays, were never counted as Hitachi’s sales, so Hitachi can’t blame Oracle for its poor showing in the first quarter. Oracle accounted for $154.8 million in external disk array sales in the quarter, up only a measly 2.9 percent, and Fujitsu had a comparatively skinny slice of the external disk array market (including boxes it resells made by EMC), at $143.5 million, and actually saw sales drop 11.8 percent. Other vendors did not keep pace either, and as a group, they saw sales slip by 1.2 percent to $712.1 million.

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