Cooling Server Sales Reach Pre-Recession Levels

December 5, 2011 Timothy Prickett Morgan

It looks like the data centers and data closets of the world, which have been eating servers like crazy in the second half of 2010 through now, are starting to get full. The appetite for system buying was starting to slow in the third quarter, according to statistics from Gartner, but was still pretty healthy nonetheless. The question now is whether the market can have a bumper fourth quarter and beat last year’s high, and while this is possible, it seems unlikely.

Gartner reckons that server makers sold $12.97 billion worth of machines in the third quarter ended in September, an increase of 5.2 percent compared to the year-ago period. Once again, server shipments outpaced server sales, with 2.37 million units going out of the factory door and channel warehouses, up 7.2 percent. Sales and shipments were not, of course, uniform globally. The world may be flat, but markets of all kinds are still rising and falling like the choppy surface of the ocean during a storm.

“The third quarter of 2011 produced growth on a global level but there was some significant variation in growth by region,” said Jeffrey Hewitt, research vice president at Gartner. “All regions showed growth in both shipments and vendor revenue except for Western Europe, which posted a 4.9 percent decline in revenue for the period. Asia/Pacific grew the most significantly in shipments with a 23.9 percent increase. Eastern Europe posted the highest vendor revenue growth at 27.4 percent for the period.”

Gartner measures sales at the end user level, including sales through the channel, and its numbers are always a little bit different from those of rival IDC, which reckons them at the manufacturer factory level. In the quarter, Gartner believes that IBM sold $3.85 billion in iron, up 3.5 percent from the prior year’s quarter and pushed 287,507 machines worldwide, flat from Q3 2010.

IBM’s Power Systems machines running its AIX variant of Unix accounted for $1.21 billion in sales, up an eyebrow-lifting 27 percent from a year ago. At this point, IBM sells more Unix iron than Oracle and Hewlett-Packard put together, with $550 million and $540 million in sales and declines of 11.6 percent and 18.5 percent, respectively, in the third quarter. In the Unix racket, HP is facing headwinds in the data center because Oracle has said future versions of its software will not run on Itanium chips and therefore HP-UX, and IBM has been keen to capitalize on the confusion in the wake of the Oracle acquisition of Sun Microsystems and now the Oracle-HP catfight over the Itanium processor. Total Unix system shipments came to 45,696 boxes, down 6.8 percent, but revenues rose to $2.43 billion, up 3.5 percent.

IBM had a much smaller slice of the X86 server racket in the third quarter, with 268,394 boxes sold and just under $1.5 billion in sales. IBM generated $1.14 billion in sales of Power Systems-IBM i and System z mainframe platforms, down 11.3 percent, and at least by Gartner’s numbers. The combined total of all proprietary platforms–mainframes from Unisys, Bull, NEC, and Fujitsu as well as IBM i and OpenVMS machines from Big Blue and HP, respectively–fell by 12 percent to $1.54 billion.

The overall X86 server market grew sales by 9.3 percent to just under $9 billion and shipments by 7.6 percent to 2.32 million units, with HP and Dell dominating by far. HP sold 684,230 machines and raked in $3.13 billion, but its shipments were off 2.9 percent and revenues were flat because of transitional confusion caused by having too many CEOs in too short of a period of time and more intense competition from Dell. Gartner reckons that Dell sold 517,867 servers in Q3–all of them are X86 machines by definition–and they generated $1.9 billion in revenues. That’s a 3.2 percent shipment bump and a 6.3 percent revenue bump for Dell. Interestingly, networking giant and server upstart Cisco Systems, which also only sells X86 boxes, pushed 39,800 machines and generated $268.3 million in revenues, nearly tripling its business compared to a year ago. With all of its talk of Exadata and Exalogic “engineered systems” and its love of Sparc/Solaris platforms, Oracle still only sold $213.6 million in X86 iron in the third quarter. But Oracle’s x86 business was up 50.5 percent, which shows that it is getting traction with those engineered systems.

Add it all up and IBM ranked number one, with its $3.85 billion in sales, and HP came in second, with $3.8 billion, down 3.6 percent, followed by Dell with its $1.9 billion. Oracle came in fourth with $763.6 million, flat from a year ago. Fujitsu ranked fifth, with $603 million in sales, and other vendors all piled into the same box came to just over $2 billion, up a staggering 33.6 percent and driven by sales by Cisco and Lenovo in the general-purpose server market and Cray, Silicon Graphics, and a handful of other supercomputer makers.

So what about the fourth quarter of 2011? Hewitt was in no mood to make any major prognostications yet and the effect on the new x86 processors from Advanced Micro Devices and the forthcoming Xeon E5 workhorses from Intel coming in early 2012. And the European economy being uncertain doesn’t help, and ditto for U.S. economy, while we are at it. All that Hewitt would say when I talked to him last week was that the mainframe refresh cycle was slowing and that the X86 market has a very tough compare to the fourth quarter of 2010, when shipments rose by 7.1 percent to 2.32 million and revenues rose by 20 percent to $9.11 billion. “I don’t expect a downturn, but will there be huge growth? I don’t think so,” Hewitt said in an interview.