Storage Hardware and Software Take Their Lumps in Q1

June 29, 2009 Timothy Prickett Morgan

Even with the need for storage capacity and the software to manage it quite high, no sub-sector of the IT market can fight off the economic downturn all by its lonesome. And in the first quarter, according to statistics coming out of Gartner and IDC, disk array and storage software sales saw even bigger declines than in the fourth quarter of last year.

By Gartner’s box counting, external controller-based disk array revenue sales came to $3.8 billion in the first quarter, declining 11.1 percent. (These numbers do not include the substantial revenues that server makers get selling internal disk arrays for their machinery.) All of the major disk array players took their lumps in the first quarter of 2009, but oddly enough, the Others category of server vendors managed to grow their share of the pie by 6.4 percent to a total of $900.5 million. (Or maybe not so oddly enough, considering the amount of innovation these upstart disk array makers are bringing to the table.) Anyway, those Others accounted for more money collectively than market leader EMC, in fact, which saw a 16.1 percent revenue decline in disk array sales in the quarter, sliding down to $897.7 million in sales. I can’t remember the last time when I saw that kind of flip in a mature market, so maybe storage is not as mature as many of us think.

IBM came in as the number two vendor, but took its lumps as well in the first quarter, with disk array sales down 14.5 percent to $419.9 million, followed up by Hitachi with $403 million (down 7.8 percent), Hewlett-Packard with $372.1 million (down a stunning 23.8 percent), and Dell with $348.1 million (down 9.1 percent). HP fell so far that it dropped a position behind Hitachi and it is going to have to do something to claw its way back up to the number three spot. Network-attached storage pioneer Network Appliance ranked number six in terms of disk array revenues in the first quarter of 2009, according to Gartner, with $324 million in sales, down 10.2 percent. Beleaguered system and storage vendor Sun Microsystems was already in trouble before the whole IBM-Oracle-HP acquisition talks went public in March, with its storage sales dropping 30.4 percent to $150.4 million. Yikes.

Gartner didn’t elaborate much on why disk array sales fell so much, probably because its market analysts are unacquainted with decline. (I guess I should have said “negative growth,” eh?) But seriously, what can they say? Sales cycles are lengthening for all kinds of IT gear, and companies are putting off storage acquisitions excepting, perhaps, some specific high-tech gadgetry from niche players that offer a quick return on investment. This is one of the reasons why there is a tug of war going on over Data Domain, which makes de-duplication software for disk arrays and which is being fought over like a piece of raw meat in the hot sun by EMC and NetApp.

So that is the hardware. How is storage software doing? Better, but only slightly so, according to the market researchers at IDC. Storage software sales–the code that array makers and third parties create to manage, backup, and otherwise dice and slice the files stored on disk arrays–fell by 5.2 percent in the first quarter, to $2.8 billion. IDC lumps data protection and recovery, archiving (including email archiving), storage replication, storage management, storage device management, storage infrastructure, file systems, and other storage-related software into this sub-market.

Anyway, the Others category in the storage software space has been dominant here for some time, showing the relative newness of this market, and did quite well, as was the case with external disk arrays, with $870 million in sales collectively, up 1 percent.

EMC would love to be sitting on that pile of dough and that meager growth, but its sales for storage-related software fell by 14.5 percent, to $612 million. Still, EMC is the market leader, even if Symantec (thanks to its acquisition of file system maker Veritas a few years back) managed to grow 2.5 percent in a bad quarter, to $531 million and is starting to close the gap. IBM’s storage-related software sales fell by 7 percent, to $342 million, a bit worse than the class average, and NetApp’s sales fell by 4.7 percent, to $233 million, a tiny bit better than average. CA, formerly known as Computer Associates, saw a market-meeting 5 percent decline, to $120 million in revenues in Q1 for storage software, and HP took it severely on the chin, with sales plummeting by 21.5 percent to $97 million.

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