Mainframes Put IBM Back on Top for Servers in Q4

February 28, 2011 Timothy Prickett Morgan

The Others category was the big winner for IBM in the fourth quarter of 2010 for server sales, according to the latest statistics from Gartner. Pent-up demand for mainframes helped Big Blue rake in the bucks for its new System zEnterprise 196. And, I think but I cannot prove, the Power Systems-IBM i combo did its part in the quarter to help raise Big Blue’s revenues in the system racket.

Gartner believes that in the final quarter of last year, server makers shipped 2.38 million servers, representing $14.7 billion in revenues. That represented only 6.5 percent growth in shipments compared to the year-ago period, but aggregate revenues across all server types and makers rose by 16.4 percent, thanks to expensive mainframes and more heavily configured machines of all types as server virtualization becomes the norm for a greater percentage of workloads.

Mainframes were not the only boxes with pent up demand, of course. “2010 was a year that saw pent-up x86-based server demand produce some significant growth on a worldwide level,” explained Jeffrey Hewitt, a research vice president at Gartner who does the server box counting. “The introduction of new processors from Intel and AMD toward the end of 2009 helped fuel a pretty significant replacement cycle of servers that had been maintained in place during the economic downturn in 2009.” Hewitt said that blade server and cookie-sheet (or sometimes called skinless) servers helped bolster x64-based server sales and shipments–it was not just about a recovery in racks and towers. “Ongoing blade server growth and the introduction of ‘skinless’ servers in the x86 segment also helped push 2010 results into double-digit growth rates, despite ongoing constraints in RISC/Itanium Unix platforms. The introduction of new mainframe platforms from IBM helped to drive increases in the mainframe segment with 68.3 percent revenue growth of IBM’s System z platforms in the fourth quarter.”

Hewlett-Packard was the top server shipper and seller in the first three quarters of 2010, and remained the shipment king in Q4 as it will be for the foreseeable future. IBM would have to buy Dell to seal a nearly permanent lead over HP in servers–something that IBM enjoyed even after HP bought Compaq a decade ago right up until last year. If IBM wants to blow a lot of money, acquiring Dell might make a lot more sense than spending it on its own shares. But IBM doesn’t want to be in the commodity business–even though that’s what most of us buy these days. They don’t call it Inexpensive Business Machines, after all.

In the fourth quarter, IBM pushed out 332,254 servers, for a total of $5.21 billion in sales; that was only 3.8 percent growth on shipments, but a very sweet 26.4 percent growth in revenues. HP shipped out 767,026 boxes from its factories (mostly from Houston, and up 6.9 percent compared to last year), and that generated $4.46 billion in revenues, up only 12.8 percent because HP’s high-end Itanium-based Integrity business is as flat as yesterday’s seltzer because of so many delays getting the quad-core “Tukwila” Itaniums into the field.

Dell came in second place in terms of shipments, with 515,274 machines shipped in the fourth quarter (up 6.3 percent), but revenue growth matched IBM’s 26.4 percent (an impressive feat for an X64-only server maker to do), giving Dell $1.92 billion in server revenues. Oracle is still suffering from bad compares with the earlier incarnation of its server business, formerly known as Sun Microsystems and formerly selling a lot more iron generating some more revenues but not profitably. Oracle’s server shipments plummeted 40.8 percent, to a tiny 36,614, in the fourth quarter, and revenues fell by 16.2 percent, to $805.6 million. In the RISC/Itanium-Unix racket, Oracle only sold 19,879 machines, down 31.2 percent from the prior year, and its Unix server revenues fell by 15.5 percent. So Oracle’s decline is not just about pulling back in X64-based servers and focusing on database cluster appliances with these machines.

Oracle’s decline in Unix was more or less canceled out by IBM’s growth in the quarter, with its Power Systems machines accounting for $1.33 billion, up 10 percent, with shipments up 10.2 percent, to 22,494. (I will remind you that there was a time more than a decade ago when IBM sold that many AS/400s in a good quarter, and generated close to $1 billion in sales doing it.) HP’s Unix box shipments rose by 3.1 percent, by revenues fell by 5.4 percent to $829.2 million. That revenue decline, I think, is mainly because HP is offering much better bang for the buck with its new Integrity blade and Superdome 2 systems compared to their predecessors. But HP has not explained it. The overall Unix market fell by nine-tenths of a percent to $2.97 billion, and shipments were off 10.7 percent, to 55,429 boxes.

X64-based servers did well, with 2.32 million machines accounting for $9.11 billion in revenues globally. HP had 37.7 percent of the X64 server revenue pie, with Dell getting 21.1 percent and IBM getting 13.2 percent.

Now, let’s talk about those Other platforms. If you do the math on the Gartner numbers, you are talking about 6,510 machines, down 16.9 percent, but generating $2.6 billion in revenues, up 28.8 percent. Average selling prices on those machines rose by 55 percent, to just under $400,000. If you extract the IBM Others from this, you are talking about 4,575 machines, actually down 22.3 percent from a year ago, generating $2.19 billion in revenues. My guess is that several hundred of those IBM Other machines were System z boxes and they accounted for the bulk of the revenues. Presumably the remainders are Power System-IBM i machines, but Gartner and IDC don’t talk about proprietary platforms separately any more, except for IBM mainframes.

For the full 2010 year, server makers shipped 8.84 million machines (up 16.8 percent) and generated $48.8 billion in sales (up 13.2 percent). HP shipped just under 2.8 million boxes, for $15.3 billion, and IBM pushed 1.16 million, for just over $15 billion. Dell moved 2.07 million machines in 2010, and booked $7.19 billion in revenues. Oracle/Sun sold only 162,340 machines and made only $3.1 billion in sales, followed by Sparc partner Fujitsu, which had 289,782 shipments that drove $2.14 billion in revenues.

How did those Others servers–meaning not RISC/Itanium Unix or X64 machines–do in 2010? Sales of the Others boxes were down 1.5 percent, to just under $7 billion; there were 20,119 boxes in the Others category, down 25.2 percent. If you only look at Others machines bearing the IBM brand, then box shipments fell 18.3 percent, to 13,743 machines, but revenues rose by 36.7 percent, to $5.6 billion. Again, I think Power Systems-IBM i machines represent the bulk of the shipments here, but System z mainframe represent the majority of the revenues. But that’s just my guess.