Gartner: Fatter Servers Drive Revenues in Q1

June 13, 2011 Timothy Prickett Morgan

In last week’s issue of The Four Hundred, I went over what the box counters at IDC reckoned happened in the server market in the first quarter. IDC looks at the market at the vendor factory level and gives a certain dicing and slicing. The box counters over at Gartner look at sales by vendor type including the reseller channel and direct sales from the vendors with a slightly different angle.

By Gartner’s count, customers shelled out $12.67 billion for servers in the first quarter, an increase of 17.3 percent compared to the year-ago period. The number of boxes shipped by vendors and their resellers to customers (and distinct from the number that went into the channel during the quarter and are still sitting there waiting to be sold, as is always the case) rose by 8.5 percent, to 2.31 million units.

“X86 servers forged ahead and grew 8.6 percent in units for the year and 17.5 percent in revenue,” explained Jeffrey Hewitt, the research vice president at Gartner who is responsible for putting together the server stats. “Following earlier trends, the x86-based server market provided an increase in average selling prices that pushed revenue higher than shipments, and this was the case in the first quarter for all regions. RISC/Itanium Unix servers finally exited their slump and grew 5.2 percent in shipments and 20.7 percent in vendor revenue, compared with the same quarter last year. The other CPU category, which is primarily mainframes, showed a growth in vendor revenue of 19.6 percent.”

Revenues for blade server based on X64 processors (Gartner still calls them X86 boxes) were up by 24.6 percent, faster than the market at large, and shipment growth for X64 blades was up 6.1 percent, slower than the overall market. Obviously, people are willing to pay a hefty premium for X64 blade servers, and it seems very likely that this is due to the build-out of X64-based virtual servers now commonly called private infrastructure clouds.

Rack server revenues grew by 19.6 percent, a little better than the overall market (though not by much), but shipments rose much faster than the overall market, rising 11.2 percent. Clearly there is a lot of pricing pressure in rack servers these days, and average selling prices are going down, not up. Part of the reason for this is that companies are using stripped down “cookie sheet” servers for massive hyperscale Web applications, supercomputer clusters, and other big data jobs (like supporting Hadoop processing of unstructured data).

Gartner did not provide any data on how well or poorly tower servers did.

Hewlett-Packard was the top shipper and top money maker in the server racket in the first quarter, with 687,502 machines sold (up 2.3 percent) and generating $3.82 billion in sales (up 12.9 percent). Thanks to mainframe and Power Systems sales both growing at the same time (something that hasn’t happened in years), IBM was able to grow its revenues into end user accounts by 23.3 percent–almost twice the rate of HP–but still only generated $3.76 billion in revenues in the first quarter. IBM only pushed 272,238 boxes (up only 1.6 percent), making it the third largest shipper in the quarter. Dell shipped 508,650 machines in Q1, actually declining a tiny bit (0.4 percent, in fact), but grew revenues by 13.1 percent to $1.89 billion.

Oracle had a much-improved quarter revenue-wise, with sales up 33.6 percent to $798.6 million; Oracle’s shipments fell by 13.5 percent, however, to a mere 36,795 units. This is significantly less than Sun Microsystems was going for before the Great Recession, and a lot of the change is Oracle’s decision to focus on profitable server servers, not just selling boxes for the sake of selling boxes. Fujitsu didn’t have a great quarter, with shipments down 1.2 percent to 76,648 machines and revenues down 8.3 percent to $591.9 million.

The Others category, which includes supercomputer makers Silicon Graphics and Cray as well as upstart server maker and networking giant Cisco Systems, accounted for $1.8 billion, up 24.9 percent, with 725,654 machines sold, up 30.5 percent.