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Server market gets second opinion on Q4

Gartner confirms sickness

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The analysts at Gartner have reexamined the server patient, and they can confirm it's still sick.

Last week, IDC recently released its numbers for Q4 and all of 2008, and now it's Gartner's turn.

Gartner reckons that global server sales plummeted by 15.1 per cent in the final quarter of 2008, to $13.1 billion, with shipments falling by 11.7 percent. This basically echoes IDC's figures, but Gartner dices and slices the data that it releases publicly a bit differently than IDC does, which is why those of us on the outside look at both. It gives a kind of binocular view of the server terrain.

"The weakening economic environment had a deep impact on server market revenues in the fourth quarter as companies put a hold on spending across most market segments," explained Heeral Kota, the senior research analyst at Gartner in charge of the quarterly server stats. "Almost all segments exhibited similar behavior as users sought to reduce costs and spending, deferring projects where possible. Blade servers were one of the few segments to achieve any growth at all in this challenging environment."

Kota said that Unix server shipments in the fourth quarter fell 10.5 per cent and revenues dropped by 13.7 per cent. That is a much steeper revenue decline than IDC was reporting, which is a bit perplexing. In the fourth quarter, Gartner estimates that some 89,287 RISC or Itanium machines sporting a Unix operating system were shipped, down from 107,953 units in the fourth quarter of 2007. Revenues came in at $3.8bn, down from $4.4bn a year ago.

By shipments, Sun Microsystems was the dominant Unix server maker in Q4, with 52.6 per cent of the pie, compared to 28.6 per cent for IBM and 15 per cent for Hewlett-Packard. But in terms of Unix server sales, IBM was the top dog, with $1.36bn in revenues (a 36.1 per cent share), compared to HP with $1.09bn (29 per cent) and Sun with $1.06bn (28.1 per cent). These three key vendors showed double-digit Unix server revenue and shipment declines in the quarter.

As for x64 servers, which are usually set up with Windows but also have a fair portion configured these days with Linux, the decline made the Unix market look good and was nearly as steep as the IT market coped with (badly) after the dot-com bust in 2001.

For the "Other" server makers that are not in the top five, it already is that bad. Gartner figures that x64 server sales fell by 28.4 per cent in Q4, to $1.27bn, for these tier-two, tier-three, and smaller server makers. These Others saw shipments fall by 19.3 per cent to 541,904 units. Across all server makers, x64 suppliers saw an 18.1 percent revenue decline to $6.65bn and shipments fell by 11.4 per cent to 2.04 million units.

By vendor, HP continues to dominate the x64 server space, with $2.49bn in sales driven by 672,620 shipments. HP's x64 server shipments fell by only 1.3 per cent in Q4, but revenues fell by 10.1 per cent - the difference in those rates is this silly thing call price cutting as the economy contracts like the head of a turtle. Dell was able to do better on the revenue front in Q4, with sales only down 11.2 per cent to $1.4bn, but its shipments shrank faster than HP's did, down 7.1 per cent to 464,072 units.

You can tell who these two were picking on in Q4: Big Blue. IBM's x64 server sales, according to Gartner, plummeted by a stunning 30.5 per cent to $1.05bn, and shipments plummeted by 23.4 per cent to 256,234 units. For all its talk about its "Galaxy" x64 server biz, Sun still doesn't make the top five vendors, although Fujitsu and NEC do. Fujitsu shipped 62,161 x64 boxes and had $245.8m in sales in Q4 (more or less in synch with the overall market declines). NEC shipped 40,366 boxes, but dropped into the Others in the revenue rankings. Sun is number five in terms of revenues, with $194m in sales in Q4. While Sun gained a few fractions of a percent of market share in x64 revenues, it lost more share in Unix.

Overall, IBM held the top server spot in the Gartner rankings in Q4, much as it did in the IDC rankings. Big Blue sold $4.38bn in servers in the quarter, declining 17.4 per cent thanks in large part to plummeting x64 server sales. HP came in at the number two spot, with $3.94bn in sales, down 10 per cent. Dell ranked third, with its $1.4bn in sales, down 11.2 per cent, followed by Sun, with $1.26bn, down 14.9 per cent. Fujitsu rounded out the top five (including the Siemens part of the Fujitsu-Siemens partnership it just took over), with $560.4m in sales, down 9 percent. All other server makers lumped together accounted for $1.57bn, down 24.7 per cent.

Gartner is not particularly hopeful about 2009, also echoing their rival IDC. "The outlook for 2009 is a very challenging one, with the pattern of the fourth quarter more indicative for the level of demand in 2009 than that seen in 2008 as a whole," Kota said in a statement. "The continued weak economic environment will cause users to be extremely cautious with levels of expenditure which will make for a particularly challenging environment for vendors. The server market already has high levels of vendor consolidation but the conditions expected during 2009 will increase the threat of further consolidation."

Anyone want to buy Cray, Silicon Graphics, Rackable Systems, Verari Systems, Groupe Bull, Unisys, or maybe even Sun Microsystems? ®

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