NetApp Shoots By IBM For Number Two Spot Behind EMC In Disk Arrays

June 11, 2012 Timothy Prickett Morgan

Difficulties in obtaining disk drives of specific type and capacity are still affecting the PC, server, and disk array businesses, but the problem is much less severe than it was a year ago, and the external controller-based disk array business seems to have largely recovered.

According to the latest statistics from Gartner, file-based and block-based external storage array sales combined for $5.44 billion in sales in the first quarter, and 8 percent increase over the sales level in the first quarter of 2011, when the disk shortages, caused by the flooding in Thailand, where about a quarter of the world’s disk drives and a big portion of disk drive parts are made, were just starting to affect PC, server, and array sales.

Revenues for arrays were helped by the fact that raw disk prices for disks used in external arrays remain higher than they were before the flooding started to affect disk supplies and therefore prices. Gartner did not extract this increased price from the revenue bump to see if there is any real growth in the business–meaning, an increase is raw capacity purchased or for beefier array hardware to drive the disks–but I suspect that the 8 percent revenue increase has more to do with the underlying costs of disks.

As you already knew, EMC remains the absolute monarch of the disk array biz, with $1.77 billion in revenues in the first quarter, rising a very impressive 16.5 percent and giving EMC nearly a third of the overall market. IBM used to be number two in the disk array racket–well, if you go back far enough, it was the undisputed array maker as it was the largest system maker by far, too–but in the first quarter, NetApp shot by Big Blue, growing 9.8 percent and hitting $691.5 million in sales. IBM only grew 1.5 percent, which gave it $600.4 million in disk array revenues in Q1.

Hitachi grew by 6.4 percent, hitting $518.3 million, followed by Hewlett-Packard, up only 1.7 percent to $491.5 million. HP’s 3PAR storage array sales more than doubled, but its LeftHand P4000 (acquired) and homegrown MSA and EVA arrays all shrank. HP and Sun Microsystems used to resell Hitachi arrays, but those days are long gone now.

Like IBM and HP, which have done their share of disk acquisitions, Dell has as well, and that is one reason why its external array biz grew by 12.4 percent to $431.4 million in the quarter. Gartner reckons that $317.1 million of Dell’s disk array sales came from its acquired EqualLogic and Compellent arrays; the company’s partnership with EMC soured two years ago when Dell, like other server makers, decided it needed its own arrays and switches to sell a complete stack. Thus far, EMC has not retaliated by starting up its own server business and seems content to resell Cisco Systems UCS blade and rack servers.

Fujitsu and Oracle really brought the market down, falling 19.6 percent and 17.5 percent, respectively, to $143.9 million and $70.4 million in external disk array sales. Other vendors accounted for $724.7 million in sales, up 6.4 percent and growing slightly slower than the market at large.

Interestingly, and perhaps pointing to issues with the Chinese and Indian economies, disk array revenues were only up 4.1 percent in the Asia/Pacific region in the first quarter, and actually fell by 12.3 percent in Japan, which is still struggling in the aftermath of the earthquake and tsunami in March 2011. The server biz was up in the first quarter in Japan, so maybe storage will rebound next. External disk array sales were up 14.1 percent in North America and up 17.1 percent in Latin America in the quarter, which seems like normal healthy growth. Assuming all the revenue bump was not just higher disk prices that passed straight from customers through the disk array makers and back to the disk drive makers. The disk biz has to grow profits as well as sales, and at least in something that looks like lockstep, to be healthy.