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Global server sales cool a smidgen

Waiting for Opteron 6200, Xeon E5, and the EU to stabilize

Peddlers and pushers of server tin had a tough time in the third quarter of this year, according to statistics from Gartner, with shipments rising only 7.2 per cent to 2.37 million units and revenues rising only 5.2 per cent to just under $13bn.

That said, the quarter was without a doubt one of the best third quarters in recent memory, and gets the market more or less back to the shipment and sales levels it enjoyed before the Great Recession hit in early 2008.

It probably should have been better, however, given how old some of the server iron is out there in the data centers of the world.

Gartner laid some of the blame for weaker shipment and revenue growth on tough compares and regional economic difficulties. But it could also be that buying enthusiasm was dampened by the impending launch of the Opteron 6200 processors from AMD, which came out two weeks ago, and the Xeon E5s from Intel, which have been shipping since September in limited quantities to selected customers, and which are not expected to be officially launched until early 2012.

But not by much, mind you.

"The third quarter of 2011 produced growth on a global level but there was some significant variation in growth by region," explained Jeffrey Hewitt, a research vice president at Gartner, in a statement accompanying the server stats.

"All regions showed growth in both shipments and vendor revenue except for Western Europe which posted a 4.9 per cent decline in revenue for the period," he said. "Asia/Pacific grew the most significantly in shipments with a 23.9 per cent increase. Eastern Europe posted the highest vendor revenue growth at 27.4 per cent for the period."

The x86 server remains the workhorse of the market, with sales kissing $9bn (up 9.3 per cent) and shipments hitting 2.32 million (up 7.6 per cent). HP, which has been suffering since the early summer with restructurings and reorganizations, saw its ProLiant x86 server sales flatten to $3.13bn, with shipments actually down 2.9 per cent to 684,230 machines. Dell, which was the number two x86 peddler in Q3, pushed 517,867 boxes and raked in $1.9bn.

Dell, however, grew significantly slower than the market at large. In addition, IBM's System x and BladeCenter biz was anemic, growing sales only 1.1 per cent to $1.5bn and shipments up only seven-tenths of a per cent to 268,394 boxes.

What's going on here? Well, Fujitsu and Cisco Systems are taking market share, that's what.

Fujitsu's x86 server sales rose by 9.1 per cent to $349.5m, and shipments were up 5.6 per cent to 77,796 boxes. Cisco Systems, which only sells machines based on Intel's Xeon processors, pushed out 39,800 blade and rack servers in the quarter and nearly tripled revenues to $268.3m. Cisco has no doubt taken a little piece out of the x86 server hides of HP, Dell, and IBM.

Chinese PC and server maker Lenovo is also making headway, nearly doubling its shipments in the quarter. At this rate it will be as big a player in x86 machinery as Fujitsu next year, and have already passed Oracle in the x86 racket.

In the RISC/Itanium space, for which Gartner provides some separate statistics for in its public quarterly reports, Oracle is shrinking but is still the top Unix system shipper.

The Unix market consumed only 45,696 machines in Q3, down 6.8 per cent from the year-ago period, and these machines accounted for $2.43bn, up 3.5 per cent. Nearly all of that Unix systems' revenue growth can be attributed to Big Blue selling fatter Power Systems machines, which plumped its Unix revenues by 27 per cent to $1.21bn.

Oracle, by contrast, saw Unix system revenues drop by 11.6 per cent to $550m, while HP fell by 18.5 per cent to $540m. Fujitsu, which had a bumper Q2 thanks to the delivery of the K supercomputer to the Japanese government (adding approximately $400m to its server sales in Q2), went back to its normal self in RISC/Unix machinery in Q3, with shipments down 35.8 per cent to 1,096 machines and revenues down 15.3 per cent to $65.1m. The K super is a parallel RISC machine, but it runs Linux, not Solaris, so it doesn't show up in the Unix data from Gartner.

If you extract all of the other server platforms out of the numbers, machines not based on x86 chips and not running Unix on either RISC or Itanium architectures accounted for $1.54bn in revenues in Q3, down 12 per cent, with shipments off 39.6 per cent to a mere 2,958 machines.

However, do the math: the average selling price of those machines rose by 45.7 per cent to $519,727. That is why proprietary machines are still peddled by vendors, although in dwindling numbers and with slackening revenue streams. IBM must have had some pretty big mainframe deals, because ASPs were up 69 per cent to $715,110 in its "others" category. Nonetheless, Big Blue's other system sales fell by 11.3 per cent to $1.14bn.

If you add it all up, HP's woes let IBM just out ahead of it in the race for server dollars in the quarter. IBM's overall server sales rose 3.5 per cent to $3.85bn and HP's fell by 3.6 per cent to $3.8bn. Dell ranked third by total revenue, with $1.9bn in sales, up 6.3 per cent, and Oracle came in fourth, with $763.6m in sales, flat from a year ago. Fujitsu held its fifth spot on the Gartner server charts, with $603m in sales, up 3.6 per cent. Other vendors accounted for $2.05bn in sales, up 33.6 per cent, boosted significantly by Cisco and supercomputer maker Cray, which hauled in some big deals in Q3.

Looking ahead to Q4, Hewitt tells El Reg that he is wondering if the x86 server build-out among service providers and cloud computing providers will continue. And while Hewitt says Intel is great at providing incentives to server makers to keep sales humming between product transitions, the fourth quarter could present some difficulties, given the expectation of a Xeon E5 launch early in 2012.

To counterbalance that effect, Intel will be booking a whole bunch of Xeon E5 sales to cloud and HPC customers in Q4 ahead of the launch.

Hewitt was confident enough in the current state of the economy in North America to say that x86 server revenues and shipments will be up in the low-to-middle single digits, with shipments outpacing revenues as they have all year.

"I don't expect a downturn," says Hewitt. "Will there be huge growth? I don't think so."

Outside of the x86 market in North America, Hewitt did not want to make too many predictions because there are so many different economic and political uncertainties in so many regions of the world right now. China will continue to grow, Western Europe will continue to have issues, Brazil will be the powerhouse of Latin America as it has been, and some Eastern European countries will also spend more money on servers. Hewitt stopped short of pinning down a precise forecast for global server sales and shipments, given all the variables.

In the fourth quarter of 2010, server makers pushed 2.38 million machines, up 6.5 per cent, and brought in $14.7bn, up 16.4 per cent, thanks in large part to an IBM mainframe and Power Systems refresh cycle and a truly huge jump – 20 per cent – in x86 system sales to $9.1bn. This will be a very tough act to follow and damned near impossible to repeat.

Particularly if customers sit on the sidelines and wait for Intel's formal Xeon E5 system launch next year. ®

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