Sales of servers perked up considerably in the first quarter, according to statistics put together by IT market researcher IDC, with revenues at the factory level among server makers rising 4.7 per cent to $10.42bn. While that is arguably against a very easy compare, considering the dramatic downdraft of worldwide server revenues thanks to the economic meltdown early last year, this is the first quarter of growth on an annual basis for seven quarters.
Revenues did not climb back to their pre-crash levels in the first quarter of 2008, when server sales hit $13.15bn. It will be a long time before we see that level again, and some people are finally coming around to the idea that it may never happen again unless something radical happens to either increase the amount of crunching companies do or the pace of server capacity increases slows, thereby pushing up prices.
The server box counters at IDC said that the recovery in server spending was driven by customers of all sizes buying x64 servers after putting off at least some system purchases for one or two years during the meltdown. IBM, Hewlett-Packard, and Oracle - the three Unix platform providers that account for the bulk of Unix server sales - all had products in transition during the first quarter, which hurt sales, and IBM's mainframes are expected to be upgraded in the second half of this year, which damped sales of this legacy box.
"IDC expects the recovery to extend to Unix and mainframe platforms in the second half of 2010 as the technology refresh extends from volume- to value-oriented systems with somewhat longer planning horizons," Matt Eastwood, group vice president of enterprise platforms at IDC, in a statement accompanying the numbers. "It's also important to note that we are in the middle of one of the sharpest periods of market inflection in a decade and we expect significant shifts in technology usage and market shares to occur as the recovery continues."
In other words, maybe Unix and mainframes don't bounce back quite as high as their platform suppliers are clearly hoping. But no legacy platform dies easily or quickly, so we'll all be living with Unix and mainframe boxes for a long time to come.
By primary operating system platform on the boxes, IDC reckons that Windows was once again the dominant operating system in terms of the revenues it drove in the first quarter of 2010. In fact, Windows got the biggest piece of the server pie in its history in the first quarter, at 48.9 per cent of worldwide server revenues, thanks to revenues for Windows boxes rising by 33.6 per cent to $5.1bn. Windows server shipments were only up 28.3 per cent year-on-year, which means Windows is being deployed on larger and more pricey systems.
IDC originally said that Windows was not the fastest-growing platform in the first quarter, with Linux server sales up 36.5 per cent growth, to $1.9bn in Q1, but has rejiggered its numbers and now says Linux machines only saw 20.4 per cent revenue growth in Q1, to $1.7bn. Linux boxes accounted for 16.2 per cent of the server pie in the quarter, up more than four points from the year-ago quarter. It is hard to imagine Linux attaining more than 25 per cent share, unless something really awful happens in the Unix base.
Like Oracle, Hewlett-Packard, or IBM freezing development of their respective Solaris, HP-UX, and AIX platforms. It is not hard to imagine Oracle or IBM selling off their server businesses to focus on software and services, either, letting someone else do the engineering and design and designating them as hardware resellers and operating system developers. If the economy had gotten truly bad enough - or takes a double dip - you can bet a money-losing Oracle or IBM hardware business would be put up on the auction block.
Because of the uncertainty surrounding Oracle's acquisition of Sun in January, IBM's then-impending Power7 server rollouts in the midrange and on blades, and Intel's delays with the Itanium 9300s, the three key Unix suppliers all had a rough quarter. IDC reckons that across all players, Unix server revenues were down 29 per cent to $2.3bn. At this rate Linux will be 25 per cent of the pie, Unix will be 20 percent, Windows will be kissing 50 per cent, and the rest will be only 5 percent or so.
IDC calculates that x64 servers (running whatever operating system you please) accounted for $6.8bn in sales in the first quarter, up 33.6 per cent, while the smorgasbord of non-x64 platforms (RISC boxes, Itanium boxes, and mainframe behemoths) accounted for only $3.6bn, falling 25.9 per cent. Shipments of x64 boxes rose by 25.7 per cent worldwide, to 1.8 million units. This was the fastest rise for the x64 market in a decade, but then again, the bottom fell out of the market last year too.
Blade servers continued to be a luxury in the quarter, but sales were up 37.2 per cent, to $1.4bn; blade shipments rose by 20.8 per cent in the quarter, showing that customers are buying denser blades, particularly to run virtualized workloads. HP maintained an impressive lead in blades, with 56.2 per cent of revenues, with IBM getting 23.6 per cent. Both companies gained market share, which means Dell and Oracle, the other two suppliers, probably lost share in blades. (IDC didn't say.)
Like Gartner, which reported its guesstimates about the server racket earlier this week, IDC believes that HP has unseated IBM as the top server maker when ranked by revenues. (IDC counts factory revenue at the server makers, which includes filling up the channel with new gear, while Gartner counts end user sales, including the channel as it sells old and new gear, so their numbers are never exactly the same).
IDC says that HP had $3.39bn in server revenues at the factory level, up 16.3 per cent, shooting past an IBM that declined 1.4 per cent to $2.87bn. The two were neck-and-neck a year ago, with $2.9bn in sales each. But just for fun, remember that in the first quarter of 2008, HP had just under $4bn in sales, and IBM was just over $3.6bn. It is hard to imagine either being able to hit $4bn again during a first quarter, unless a major product is launched in a fourth quarter and sales get pushed into Q1.
Dell ranked third, with $1.7bn in revenues in Q1 (up 51.9 per cent), while Oracle/Sun fell further into the depths to $683m (down 31.9 per cent). Fujitsu rose by 1.9 per cent and almost matched Oracle, with $675m in sales in the first quarter. Other vendors wrapped together accounted for $1.1bn in sales, down 18.4 per cent.
Yes, the server biz is a tough one. And getting tougher generally, but easier than last year for sure.
Bootnote: IDC has run a correction for a bunch of the stats originally reported in this story. Linux did not do as well as originally thought, and that caused a lot of numbers to change. ®