IDC Concurs That The Server Racket Is Rough

June 10, 2013 Timothy Prickett Morgan

If you were hoping that the box counters at IDC would have better news about the server business–or lack thereof on some fronts–in the first quarter after Gartner gave its prognosis, sorry. No can do. While the world is consuming more machinery than it did in past years, the revenues are sliding and it is my guess that profits are sliding even faster across the industry.

And that is not a good thing for the major IT vendors, who are depending on lush and luscious system profits to run their businesses for the long haul instead of for the short term.

IDC said in its most recent server tracker report that server shipments were down 3.9 percent to 1.9 million units worldwide across all server makes, models, and architectures. And more disconcertingly, revenues fell in the March quarter by 7.7 percent to $10.94 billion.

“Customer demand for new servers is being impacted by ongoing server consolidation, technology transitions, and challenging macroeconomic conditions across the globe,” said Matt Eastwood, general manager of enterprise platforms at the IT market researcher. “In fact, every geographic region except Asia/Pacific experienced revenue contraction in the quarter. It is clear that challenging market conditions are increasing the competitive dynamics for server market share globally, particularly since compute represents a critical element of larger IT transformations that continue to reshape broader enterprise IT market opportunities.”

Sales of volume systems, which cost under $25,000 in IDC’s partitioning of the server market, declined by 3.1 percent, which is better than the market overall but still not good. High-end iron, which in IDC’s book means machines that cost more than $250,000, declined by 17.1 percent year-on-year, and midrange gear, which costs between $25,000 and $250,000, declined by 18.3 percent. You can blame mainframes some and RISC and Itanium systems running Unix a lot for those declines. Inasmuch as the IBM i software platform is tied to the Power hardware platform, we all have to root like hell that business does better than its peers. The trouble is, IBM has done well crushing down Sun/Oracle and Hewlett-Packard, and Oracle has taken a big chunk out of HP by threatening to remove support for Itanium processors. (It may not matter in a few years regardless of what some court says about what Oracle needs to do and how much damages it might need to pay HP.) To be fair, three of the four major Unix platforms–those from IBM, Oracle, and Fujitsu–are in the middle of processor transitions, so that messes up sales. But Unix is the new mainframe and is being attacked by Linux and Windows running on X86 iron–and largely Intel Xeon iron, at that.

By platform, Linux system sales were positively impacted by a number of big supercomputing deals and public cloud deployments, and Linux-based server sales were up 3.4 percent in the first quarter to $2.5 billion. Unix machines, as a group, declined 35.9 percent in the quarter, to a piddling $1.4 billion, and now you know why IBM is trying to tell anyone who will listen that its PowerLinux machines can meet and beat any X86 iron in terms of cost and performance running Linux workloads. Windows servers as a group declined by 4.2 percent in Q1, to $5.7 billion. IBM’s System z mainframe sales were up 7 percent in the quarter against a very easy compare to $800 million, according to IDC, but that was significantly less growth than IBM was expecting, as The Four Hundred previously reported. IDC does not break out sales of IBM i-based systems.