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By | Timothy Prickett Morgan 30th May 2013 00:28

Server racket 'challenging' in Q1, says IDC

Windows takes a dip, RISC/Unix cannonballs, Linux defies gravity

It is not a fun time to be peddling servers, but it is probably a great time to be buying them, according to the box-counting wizards at IDC.

Both server revenues and shipments were down in the first quarter, marking the fifth of the past six quarters where revenues took a dip. There are so many different kinds of transitions going on in Server Land it is a wonder it isn't worse, frankly.

In the quarter ended in March, IDC reckons that server revenues worldwide (at the vendor factory level, not at the retail level) came to $10.94bn, a drop of 7.7 per cent from the year-ago period. Shipments dropped by 3.9 per cent to 1.89 million boxes across all form factors, which include tower, rack, blade, and density optimized machines.

"Customer demand for new servers is being impacted by ongoing server consolidation, technology transitions, and challenging macroeconomic conditions across the globe," explained Matt Eastwood, general manager of enterprise platforms at IDC, in a statement accompanying the ships and bucks of the server biz.

"In fact, every geographic region except Asia/Pacific experienced revenue contraction in the quarter. It is clear that challenging market conditions are increasing the competitive dynamics for server market share globally, particularly since compute represents a critical element of larger IT transformations that continue to reshape broader enterprise IT market opportunities."

Gartner pretty much said the same thing in its Q1 server report on Tuesday, although it dices and slices the market slightly differently so you need to have a look-see at both sets of numbers to get a three dimensional view of the server terrain.

IDC concurs with Gartner: The server biz was challenged in the first quarter

IDC concurs with Gartner: The server biz was challenged in the first quarter

By IDC's numbers, as HP's server business contracted by 14.8 per cent, nearly twice as fast as the market at large, but it was still able to retain its top spot ahead of Big Blue, which shrank by 13.4 per cent. Both HP and IBM are having issues in their Unix systems businesses, as are Oracle and Fujitsu, and Dell, Cisco Systems, and a bunch of original design manufacturers (ODMs) who build boxes directly for hyperscale data centers are all taking share from them in the x86 racket.

As it is, IDC says Cisco, which grew its sales of blade and rack servers (which only use Intel Xeon processors) by 34.9 per cent to $450m, putting it in a statistical tie with Fujitsu and Oracle. And, interestingly, Fujitsu generated more revenues from server iron than did Oracle, something that Gartner also showed in its numbers and something that has never happened since Sun Microsystems got into the Unix server racket nearly three decades ago.

Oracle is still bleeding revenues like crazy, with another 26.2 per cent drop in the first quarter. Big Larry can talk about how Oracle is committed to Sparc T and M processors as much as he wants, but the sliding has not stopped for two years now and it will not be long before Cisco passes by Oracle.

IDC likes to take a stab at figuring out what the primary operating system is on each box that gets sold, just to give a platform flavor to its numbers. (Yes, we all know machines ship barebones in a lot of cases, but you can put some operating system on it, even a freebie Linux or Unix, and put it in an OS bucket for counting.)

By IDCs guesstimations, the Windows server space is still the biggest part of the server market (as Unix was 15 years ago), accounting for 52.2 per cent of all sales and driving $5.7bn in iron. But Windows declined 4.4 per cent in the quarter just the same.

That is better than dropping at market rate, mind you, but machines that would ultimately run Linux accounted for $2.5bn in sales, up 3.4 per cent. It is hard to believe that Linux will ever catch Windows, but we'll see how this whole cloud thing plays out in a decade or so.

"Unix systems are the new mainframe" is the nicest way to say it, with Unix-based revenues declining a stunning 35.9 per cent to $1.4bn in the quarter. Yes, IBM, HP, Oracle, and Fujitsu are all smack-dab in the middle of processor transitions, but business had better pick up in the coming quarters or a slew of people are going to lose their jobs.

IBM's System z mainframes, which missed their sales targets in Big Blue's first quarter, still had a 7 per cent revenue bump to $800m in the quarter, bucking the overall trend but not as much as IBM needed it to.

By form factor, blade and rack servers both took hits in the quarter as enterprise customers hesitated in their spending, while the density optimized machines preferred by hyperscale data center operators, who either run online services or provide raw and virtualized server capacity to customers on their clouds, continued to spend more money on machines.

This could be workloads shifting, or this could just be the effect of all the consumer stuff we now do on the cloud (that is also sometimes used by businesses, admittedly).

IDC thinks that 235,836 blade servers shipped in the quarter, down 18 points, but ASPs were on the rise thanks to virtualization in the data center and the upsurge of Cisco Systems, which can command a premium for its product because of the integrated networking. (Yes, El Reg is aware of the counter-intuitive nature of that in the serve biz. But some folks just love Cisco.) So blade revenues only shrank by 6 points to $1.87bn.

Vendors shipped 1.05 million rack servers in Q1, down 4.9 percent year-on-year, and prices slipped a bit and so revenues across all vendors were down 5.8 per cent to $5.8bn.

Tower machines lost air on ASPs due to competition (Dell is being very aggressive at the low-end, and HP is really feeling it), and shipments were also down as SMBs are skittish about spending money in many of the regions of the globe, and thus overall revenues for tower machines dropped by 23.8 per cent to $2.45bn.

Those density optimized machines were the bright spot in the market, and very bright indeed, with shipments up 21.7 per cent to 211,172 machines and revenues up 51.4 per cent to $736m thanks to rising ASPs. Dell, by the way, is said by IDC to have a 47.3 per cent share of this density optimized biz. ®

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