Proprietary Machines Show Some Growth In Q2, Says Gartner

September 30, 2013 Timothy Prickett Morgan

It is tough out there in ServerLand these days, and if you need to add capacity to your systems or get whole new systems, you can probably get some pretty eager salespeople to come and visit you. While the situation is not nearly as bad as during the Great Recession, the server market is itself in recession, as the latest numbers from Gartner show.

In the second quarter ended in June, the pattern is much as we have seen for the past several years. X86 systems squeak out some growth, the RISC/Itanium Unix market declines, and mainframes do their ups and downs based on IBM’s product cycles. Overall. Gartner reckons that even though shipments rose by 4 percent to 2.46 million units across all vendors, revenues nonetheless took a 3.8 percent fall to $12.35 billion. Dell and Cisco Systems continue to take bites out of IBM and Hewlett-Packard, and in the case of Big Blue, the expected bump in System z mainframe sales, which made up the largest portion of its $3.16 billion in sales in Q2, were still not enough to keep its overall sales from falling by 9.7 percent.

Blame the RISC/Itanium market, which fell by 25.3 percent to $1.6 billion in the quarter. IBM’s Power Systems machines running AIX saw a 24.4 percent decline to $908.2 million. IBM’s competitors did not fare any better, by the way. Sales of Oracle’s Sparc/Solaris platforms fell by 26.1 percent to $337.4 million, and HP had $302 million in HP-UX system sales, down 26.8 percent. Bull had $27.6 million in Unix revenues (down 11.9 points) followed by Fujitsu with $25.1 million (down 36.3 percent). Fujitsu continues to invest in its Sparc64 processors, which are used by the Japanese government in its 10.5 petaflops K supercomputer, but it is hard to believe this revenue stream is enough to justify the investments. Across all vendors, Gartner reckons that there were 27,415 Unix-based machines shipped in the second quarter, down 27.4 percent. Gartner does not provide stats on Power-based machines running Linux and IBM i, but both are obviously important revenue sources for Big Blue.

The X86 server market continues to be the engine generating shipment and revenue growth, but there is plenty of competitive pressure here that is no doubt making it very difficult for server makers to rake in profits in this part of the market. Gartner says that there were 2.43 million X86 systems shipped in Q2, up 4.5 percent, and all told they generated $9.39 billion in revenues, up 2.1 percent. HP continues to be the dominant X86 server supplier, with $2.72 billion in sales, but it took a 14.9 percent revenue hit in the period while arch-rival Dell grew its PowerEdge sales by 10.7 percent to $2.19 billion. IBM had a 10.8 percent decline, to $1.11 billion, but Cisco, which only sells Xeon-based machines, had a 43.3 percent spike in sales to $539.2 million, and its shipments were up 58.5 percent to 77,729 units. That is a long way behind IBM’s 196,142 shipments in the number three ranking by X86 shipments, but the gap is closing as IBM shrinks (in this case, by 8 percent) and Cisco is growing. Oracle, which sells X86 machines predominantly as part of its Exadata, Exalogics, and Exalytics appliances or in smaller appliances aimed at SMBs, had $379.3 million in Xeon-based server sales, an increase of 20 percent. Oracle’s growth in X86 machines is not yet enough to offset its declines in Sparc machines, but at least the numbers are moving in the right direction.

“The global server market remains in a relatively weak state overall,” explained Jeffrey Hewitt, research vice president at Gartner, in a statement accompanying the figures. “The only real regional bright spot was Asia/Pacific, with growth of 10 percent and 21.7 percent year on year in terms of revenue and shipments. Canada was the only other region that grew in both revenue and units–6.3 percent in revenue and 2.7 percent in units–while Latin America was close to flat for revenue but increased by 1 percent in terms of shipments. The U.S. also grew in terms of shipments by 1.9 percent year-on-year but declined in revenue by 5.1 percent.”