Disk Sales Compressed in the Second Quarter

September 21, 2009 Timothy Prickett Morgan

The non-stop boom in disk storage hit a wall six months ago, a wall called the economic meltdown, and sales of disk arrays are still slumping even as the economies of the world look like they are starting to stabilize a bit. The market analysts at IDC say that both internal disk arrays embedded in servers as well as external ones that link up to them from the outside in myriad ways have been impacted by the meltdown.

All told, global disk array sales dropped by 18.7 percent in the second quarter, to $5.7 billion, but vendors nonetheless managed to peddle 2,345 petabytes of storage in external and internal disk arrays combined, an increase of 15.2 percent in capacity compared to the year ago quarter. While this sounds all rosy, at least compared to the truly awful level of server sales in the second quarter that The Four Hundred told you about last week, if you do the math, the amount of money that storage makers were able to extract per unit of storage fell just as dramatically as server revenues did. To be precise, the average selling price of a petabyte of storage, as calculated from IDC’s numbers was $3.42 per GB a year ago, but has fallen by 29.4 percent to $2.42 per GB in this year’s second quarter. The disk array market got used to 60 percent capacity growth and 30 percent price/performance improvements per year, with the spread being this silly old thing called big profits. Those days are gone, at least for now.

If you do the same math for servers using IDC’s data, server shipments and server revenues in the second quarter fell by the same 30-ish percent, so the average selling price of a server stayed more or less the same. IDC didn’t put out global shipment numbers (it only talked about X64 server shipments), but Gartner did, and when you do the math, server average selling prices were down only 2 percent, to $5,748 across the whole market. That said, the average server probably had at least 30 percent and maybe as much as 50 percent more oomph, depending on how you want to measure it.

Basically, the growth in demand for capacity, whether you are talking about processing or storage, is not what it used to be.

“The enterprise storage systems market continued to feel the impact of current economic conditions, posting its third straight year-over-year decline,” explained Liz Conner, the research analyst for storage systems at IDC in a statement accompanying the Q2 figures. “However, certain sweet spots in the market continue to thrive. iSCSI SAN and FC SAN both showed strong year-over-year growth of 57.2 percent and 66.8 percent, respectively, in the entry level price bands ($0K-$14.99K) as customers continue to demand enterprise level network storage at a more economically friendly price point. Similarly, midrange NAS (price band $15K-$49.99K) enjoyed solid year-over-year growth of 20.7 percent as file-level data generation continues to be a hot topic for many customers.”

External disk array sales have been increasing over the past several years because server customers wanted to share big storage arrays with many servers via Fibre Channel or iSCSI SANs and because of the capacity limits inside of 1U, 2U, and 4U rack servers. You can only cram so many 3.5-inch drives into a machine before it melts. But in Q2 2009, sales of external disk arrays dropped by 18.3 percent to $4.12 billion. Internal disk arrays dropped by a slightly higher 19.7 percent in the second quarter, to $1.54 billion, no doubt hurt by the severe downdraft in X64 server shipments. Dell actually saw a 10.9 percent increase in internal disk array sales, to $365 million, in the quarter, a peculiar thing that IDC didn’t mention but which I extracted from its figures. IBM‘s internal disk array sales (mostly for System x and entry Power Systems servers) fell by 19.5 percent to $367 million. Hewlett-Packard saw its internal disk array business swoon by 28.4 percent, to $511 million, mirroring its server declines almost perfectly.

As internal disk controllers get cheaper and 2.5-inch SAS and SATA drives go mainstream, internal disk arrays could see a resurgence. Particularly if customers start front-ending their disks with flash memory, thereby reducing the need for large numbers of disk drives. In plain English, the uptake of flash might hurt external disk arrays more than internal ones at SMB shops.

In terms of overall disk array sales, IBM came out just barely ahead of HP, with $981 million in revenues for Big Blue (down 12.6 percent) and $980 million for HP (down 28.4 percent). EMC, which controls about a fifth of the external disk array market worldwide, ranked third across all types of disk arrays in terms of global sales, with $887 million in revenues (down 19.5 percent). Dell ranked fourth, with $769 million (down a mere 3.6 percent) and Network Appliance took up the fifth slot, with $368 million in sales (down 8.1 percent). Other storage makers–and there are lots of them–accounted for $1.68 billion in sales, but in aggregate they fell faster than the market at large with a 22.7 percent decline in Q2.

Thanks to an easier compare, disk array sales in Q3 should be better.

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