A Second Opinion on Third Quarter Server Sales
December 13, 2010 Timothy Prickett Morgan
With server revenues being a kind of leading indicator for overall IT spending, the health and wealth of server vendors and various product lines within the systems racket are something that bears paying attention to each quarter. Which is why the market researchers at Gartner and IDC spend so much time trying to figure out what it going on with servers. The Four Hundred walked you through Gartner’s analysis of third quarter server sales in last week’s issue, which looks at revenues and shipments for the overall market by vendor, as well as drilling down into RISC/Itanium boxes running Unix and overall X64 revenues by vendor. IDC looks at vendor factory revenues, and dices the market in terms of server price tags, as well as by operating system and by vendor. IDC reckons that server vendors had a total of $11.8 billion in revenues in the third quarter, up 13.2 percent compared to the year-ago period. Shipments cooled down compared to the second quarter, with only 13.1 percent shipment growth to just over 1.9 million units, according to IDC. But that is a pretty healthy shipment level considering how many servers are being virtualized these days and how much more heavily those servers are being used as they support multiple workloads. The big winners in the recession from 2001 to 2003 were the Windows and Linux platforms, and the Great Recession from 2008 through 2010 (yes, I think we are still in recession no matter what the official stats say) only helped undermine Unix and proprietary platforms and prop up Windows and Linux, which are perceived as being cheaper alternatives. In Q3, sales of Windows-based machines (or more precisely, servers that IDC estimates to have Windows as their primary operating system since some machines ship bare-bones to customers) rose by 26 percent to $5.6 billion, with shipments rising at a much slower 14.7 percent. Whenever you see revenues rising faster than shipments, customers are buying beefier boxes, and in this case they are doing so to virtualize existing Windows workloads as well as to replace more expensive Unix and proprietary machines. Linux-based servers saw 32.6 percent revenue growth, to $2.1 billion, but Unix machines stomached a 9.7 percent decline, to $2.5 billion in sales. In the fourth quarter, it is entirely possible that Linux sales can surpass Unix sales for the first time in history. Windows long since past Unix, which a decade ago was in the cat-bird seat, with close to half of total server revenues during the dot-com boom. If you count Linux as a kind of Unix–which I do, and not just to be nice–then the combined Uni(linu)x market grew by 5.7 percent to $4.6 billion in the third quarter and was down sequentially from the second quarter, when it grew by 4.2 percent to $4.7 billion. IDC reckons that Unix server sales will rebound in the fourth quarter, catching the same upgrade wave that hit x64 machines late in 2009 and through 2010 and that hit the IBM mainframe in the third quarter of the year thanks to the introduction of the System zEnterprise 196. We’ll see. I remain skeptical about the Unix racket, even after you lump the Power Systems-IBM i platform into it. By IDC’s estimates, sales of other computers–meaning those that run Windows, Unix, or Linux–were down 1.4 percent, to $1.6 billion. IBM’s System z machines running z/OS represented $1 billion in sales, according to IDC, rising 14.8 percent. By server pricing category, the volume segment (machines that cost under $25,000) had 22.8 percent revenue growth, while midrange boxes (which cost between $25,000 and $250,000) finally had a rebound, rising 19.8 percent. That was the second quarter straight of growth, and Unix systems are definitely helping here. (I think that is another way of saying Unix shops are down-shifting to smaller, less expensive, but more powerful machines from higher-end boxes.) For the eighth quarter in a row, and despite a rebounding System z market, sales of high-end machines (which cost more than $250,000) fell, in this case by 10.4 percent in Q3. Like I said, I think we have some platform downshifting going on here, and this sort of thing is generally permanent. This downshifting is how 95 percent of the iSeries and System i base ended up on Power 520-class machines. Their workloads grew a lot more slowly than Moore’s Law improvements in processing capacity. Now, this downshifting is quite possibly happening to Unix systems. Speaking of downshifting, the X64 portion of the server racket grew by 28.1 percent in Q3, to $7.8 billion, and shipments rose by 13.8 percent to 1.9 million units. In terms of overall server rankings, IDC puts Hewlett-Packard at the head of the pack, with $3.94 billion in revenues, increasing 22.2 percent compared to the year-ago quarter. IBM looks to be stuck in the permanent number two position unless the Unix and IBM i markets rebound a lot, and only had $3.61 billion in sales, up a more sluggish 9 percent and less than the overall market growth in the quarter. Dell booked $1.67 billion in sales in the quarter, up 18.7 percent, while Oracle seems to have stabilized its recently acquired Sun Microsystems server business, with sales up nearly a point to $786 million. Fujitsu, which like Oracle sells both Sparc and Xeon machines, had $608 million in sales, up only 2.5 percent. Other server makers accounted for $1.2 billion in revenues, a mere 10.1 percent of the server pie and up only 7.4 percent compared to this time last year. 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