When you are very sick and you are trying to find out what is wrong, you get a second opinion from another doctor - and so it is with the quarterly market statistics tracking server shipments and sales. Gartner usually comes first, and then IDC follows in quick succession with a slightly different set of public stats. Together, the Gartner and IDC figures give those of us on the outside of vendor walls a sense of how healthy or sick the server business is.
In the third quarter of 2008, the server business was starting to get sick. There is no question about it, as the Gartner report we covered on Monday showed. To briefly recap, Gartner said that its models indicated that some 2.32m servers were sold in Q3, an increase of 4.4 per cent in unit shipments compared to the third quarter of 2007. But because x64 server makers cut prices to maintain and then slightly increase server volumes and because customers shopping for big iron like RISC/Unix servers put their plans on hold, global server revenues worldwide shrunk 5.4 per cent to $12.72bn.
IDC has a slightly different means of counting servers, but its numbers for Q3 show the patient has a fever and is getting a little listless. IDC's box counters reckon that across all architectures, server makers peddled $12.6bn in machinery in the quarter, down 5.2 per cent and representing the largest quarterly decline since the fourth quarter of 2002.
For some reason - mainly having to do with its desire to sell its data - IDC never gives a hard number for overall server shipments in its public data, but it did say that server shipments in Q3 only rose by 2.8 per cent, the slowest shipment growth since the fourth quarter of 2006. (It is a safe bet that the fourth quarter of 2008 will be pretty bad, so don't think that stat will stand for long). IDC did give a shipment figure for x64 servers, which grew by 4 per cent in the quarter to 1.97m boxes.
"The server market experienced significant deceleration in the third quarter with particular weakness in September," explained Matt Eastwood, group vice president of enterprise platforms at IDC who helps put together the quarterly stats. "The slowdown impacted a wide range of traditional server technologies, with improved demand for blades and IBM System z notable exceptions.
"Many OEMs experienced significant pricing challenges in the quarter and revenue declines were experienced in all regions except Latin America and the Middle East and Africa (MEA). Enterprise budgets continue to face increased scrutiny as IT organizations of all types look to run their hardware harder and defer acquisitions wherever possible."
The patient seems to be having flashbacks to 2001 and 2002, too. Back in the third quarter of 2001, when the global economy was already heading south and IT was experiencing a bad hangover after the ERP, Y2K bug, and dot-com bubbles, server revenues as counted by IDC fell by 28 per cent to $9.23bn.
Ironically, the only platform to have growth that quarter - and which grew by 9 per cent, no less, to $642m in sales - was IBM's AS/400 line, which had been renamed the iSeries. Unix server sales contracted seven years ago by 37 per cent to $4.6bn, Windows server contracted by 23 per cent to $2.9bn, Linux contracted by 18 per cent to $395m, and mainframes fell by 6 per cent to $696m. To give you a sense of where the peak was, in the fourth quarter of 2000, server makers pushed out $14.45bn in iron.
Ah, the good old days.
Windows Trumps Unix
Now, back here in reality in the third quarter of 2008, Windows trumps Unix unless you count Linux as a kind of Unix (which I do for spiritual and cultural purposes). In Q3, IDC believes that server makers kicked out $5.1bn in Windows machines, a decline of 5.1 per cent and giving Windows a 40.8 per cent of the global server pie in the quarter. Unix, which is mostly a midrange and high-end play these days, accounted for $3.7bn in sales, down 8 per cent and giving Unix a 29.7 per cent share of the pie. Linux server sales fell by 2.5 per cent to $1.8bn in the quarter, giving Linux boxes a 14 per cent share.
If you add Unix and Linux together to feel better about competition for Windows, then Uni(linu)x won this quarter, comprising $5.5bn in sales. But it was a squeaker, and the combined based declined by 6.5 per cent, which is a steeper drop-off compared to the Winders platform. Other boxes - and notably IBM's System z mainframes, which are enjoying an upgrade cycle to the new z10 quad-core machines - accounted for the remaining sales couple billion dollars in sales. IBM's System z mainframe saw a revenue bump of 24.8 per cent in Q3 2008.
IDC's stats, like the data coming out of Gartner, show that the x64 server market took it hard on the chin in Q3. (But as you can see from the above comparison, nothing at all like Q3 2001). x64 server sales dropped by 6.6 per cent in the third quarter of 2008 to $6.9bn - the largest decline in six years. x64 server sales in the United States were off 12.2 per cent, the worst decline since 2001, and all regions except Latin America have x64 server sales declines.
Latin America, a tiny but growing slice of the server market, had a stunning 12.8 per cent revenue spike. (While this is wonderful, considering that the United States and Western Europe are in recession and we are all connected economically in this silly old world, how long can Latin America remain a bright spot?) IDC said that x64 server buyers were cutting back on configurations and were also shopping based on price, which drove down sales.
IDC likes to break out numbers for blade servers, which as we all know should account for more of the server market than they do. (Well, if you believe all the benefits that vendors espouse). Blade sales rose by 29.5 per cent in the quarter across all processor architectures to $1.4bn, accounting for 11 per cent of global server sales in Q3. Blades were expected to have two to three times this share by now when they hit the market in early 2000.
Hewlett-Packard's blades continue to beat out IBM, which was trouncing HP a few years back. HP had 55.5 per cent revenue growth in Q3 (OK, that is a pretty juicy number), garnering 54.7 per cent of the blade revenue pie. IBM, by contrast, had a 7 per cent revenue decline and only took 22.9 per cent share. Dell had 70 per cent revenue growth in the quarter with blades, but is starting from a small number and still has only 9.3 per cent of sales.
The box counters at IDC also like to talk publicly about how sales of servers are doing for various price bands. The so-called volume server segment - machines that cost less than $25,000 - had a 7.2 per cent decline, and the first decline for this segment in 14 quarters. Midrange boxes (which sell for $25,000 to $500,000) had a 9.5 per cent revenue decline, while high-end boxes costing more than $500,000 saw a revenue bump of 4 per cent (thanks in large part to IBM's mainframes).
While Gartner pegs IBM as the server revenue leader, IDC thinks that HP managed to edge out Big Blue in the quarter. IDC figures that HP had $3.86bn in server sales in Q3, down 2 per cent, compared to IBM's $3.81bn, down 3.1 per cent. Dell came in third, with $1.51bn in sales (down 4.3 per cent), Sun Microsystems came in fourth with $1.19bn (down 10.9 per cent), and Fujitsu-Siemens had $647m (down 8.4 per cent). All the other tier-two and whitebox vendors added together pushed $1.56bn in servers, a decline of 12.2 per cent. ®