IDC Says Server Sales Up As Shipments Go Down In Q4

March 18, 2013 Timothy Prickett Morgan

There has never been one server business, but rather many. Each new wave of technology that has come out over the past five decades is lingering on, in upgraded form, as new system architectures are introduced and enter the market like a tidal wave, toppling down what used to be conventional architectures. Sometimes, those conventional architectures become the waves, as happed with a spike in IBM mainframe sales in the final quarter of 2012.

According to the box counters at IDC, System z mainframe sales (including a base z/OS operating system on newly shipped or upgraded machines) were up 55.6 percent in the fourth quarter, to $1.8 billion. IDC does not divulge the number of machines that pushed that revenue, but I would be surprised if it was more than a few hundred boxes, which is just an amazing thing to contemplate.

Contrast this with the overall server market, where shipments were down by 3.9 percent to 2.1 million units, yet thanks to the mainframe boost in the wake of the launch of the System zEnterprise EC12 machines that started shipping last fall and despite the pretty skinny prices on the 192,000 “density-optimized” bare bones machines sold to the likes of Google, Amazon, and Facebook for around half the average cost of a server. That’s one reason why server revenues might not be as high as we might have expected, given the mainframe bump, and only rose by 3.1 percent to $14.6 billion.

For the full year, IDC reckons that vendors shipped some 8.1 million machines out of their factories, down 1.5 percent over 2011, and that these machines generated $51.3 billion, down 1.9 percent from the year-ago period. Companies are virtualizing on slightly fatter servers, but buying few machines, and cloud operators are buying minimalist designs, but buying lots of machines. And now the race is on to see if cloud buyers can commission machines fast enough to make up for the ever-slackening needs of most enterprises, who are happy to use excess capacity they get through virtualization.

This is the exact same consolidation and contraction that hit the AS/400 business in the mid-1990s when companies collapsed data centers in the wake of telecom reform, which allowed branch offices to around the world to link in more cheaply to central systems; the second wave of consolidation and contraction hit the platform in 1998 when server virtualization first found the AS/400 and continued compressing through the early iSeries years. The very rapid addition of computing capacity per processor socket enabled by Moore’s Law+1 (IBM takes three years, not two, to boost capacity by a factor of two) has also reduced revenues, since companies can upgrade systems every three, four, or five years instead of every other year. The world is a different place from 15 years ago. And the irony, of course, is that with our color smartphones and tablets and central cloudy apps, we are basically going right back to the mainframe and AS/400 dumb tube eras, only this time it is Google or Facebook that controls your data and not you.

IDC thinks the Linux server business did pretty well in the fourth quarter, with revenues up 12.7 percent to $3 billion, while Unix systems sales continued to contract, falling 24.1 percent to $2.6 billion. Windows-based servers just kept plugging along, with $6.7 billion in revenues and rising 3.2 percent. The Other platforms, once you take out System z machines running z/OS, accounted for $539 million in revenues and was up 27 percent. I suspect that IBM i-based machines are in there, but with everyone knowing that Power7+ entry machines were just around the corner and most of the market using Power 710 through Power 750 machines, it seems unlikely that Power-IBM i machines did particularly well. It would be nice to know, but IDC doesn’t break IBM i out just like Big Blue itself doesn’t any more. Unisys had a good quarter in ClearPath mainframe sales, that much I can tell you for sure, but I have no idea how well or poorly Hewlett-Packard‘s OpenVMS and NonStop platforms, which are based on Itanium servers, did.

What I can also tell you is that Europe is a big part of the server market’s problem right now. Server countries are in recession, and that is not helping companies peddle new iron. If you reckon server sales in U.S. dollars, then server makers shipped 569,000 machines into EMEA in the fourth quarter, an 11.1 percent decline compared to Q4 2011, and revenues fell 7.4 percent to $3.8 billion. Now, that is with the mainframe bump and with pretty good hyperscale server sales. Now here’s the fun bit. If you take out EMEA sales from the global figures, then all of the regions outside of EMEA had shipments of 1.53 million machines (down nearly 1 percent) but revenues were actually up 7.4 percent to $10.84 billion.