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Gartner: No server growth until 2010

Q1 worse than expected

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The box counters at Gartner gave out their stats for server sales for the first quarter of the year, and the numbers were worse even than the already bad expectations the market researcher had. Worldwide server sales fell by 24 per cent by Gartner's reckoning to $10.1bn, and shipments collapsed by a nearly identical 24.2 per cent to 1.72 million units.

The figures reported by IDC last week are for factory revenues by vendor, but Gartner does a slightly different count, showing the money shelled out by end users to server makers and their channel partners.

Normally, they are pretty close in phase, as the channel takes a steady stream of machines and pushes them out the other side, but not so in Q1, judging by the difference between the IDC and Gartner figures. IDC's factory revenue estimates for the first quarter show revenues down 24.5 per cent to $9.9bn and server unit shipments down 26.5 per cent to 1.49 million units.

"The significant decline that occurred in the fourth quarter of last year has extended into the beginning of this year," explained Jeffrey Hewitt, the research vice president at Gartner who does the quarterly server stats in a statement accompanying the figures for Q1 2009. "While this was not unexpected, the severity of the decline was greater than predicted on a worldwide level. The ongoing weakness of the global economy affected all server segments," Hewitt said, adding that this was the worst decline in the history of Gartner's counting boxes.

If you don't think that there is a gory and bloody price war going on right now in the server arena and that it won't continue and worsen for the rest of the year, you must have blinders on and earplugs in. It is going to be very tough for any server maker to get a dollar or euro or yen or yuan or ruble to the bottom line this year. And all this new processor technology is only going to make the price war worse thanks to Moore's Law. They all have to sell that much more iron to get the same revenue.

Gartner believes that the x64 server racket saw a 23.9 per cent drop off in unit shipments, to 1.65 million machines, and a 27.1 per cent decline in revenues, to $5.45bn. Hewlett-Packard got just under $1.9bn in sales for x64 iron in Q1, compared to $1.23bn for Dell, $855.7m for IBM, $251.6m for Fujitsu, and $185.7m for NEC. (Yes, Sun Microsystems did not make the top five x64 revenue or shipment rankings yet again, and until it does, being hopeful about Sun's server business is a strain).

Unix-based servers based on RISC and Itanium architectures had a 31.3 per cent in shipment decline, to 64,510 machines, and a 20.4 per cent revenue decline, to $2.95bn. (Gartner didn't talk about Windows or Linux explicitly, but it looks like Windows and Linux didn't get hit as hard as Unix if you take them together as the x64 platform). In terms of revenues, Big Blue is once again basking in the glory of being the top Unix player, with $1.12bn in sales, compared to HP's $831.6m, Sun's $822m, and Fujitsu's $119.8m.

IBM declined a lot less, at 13.5 per cent, in the Unix space than HP (down 18.8 per cent), Sun (down 26.9 per cent), and Fujitsu (down 38.1 per cent). IBM gained three points of revenue market share in the quarter by Gartner's reckoning, which means some IBM sales reps are going to get bonuses if Big Blue doesn't need to hoard the cash for share buybacks.

Across all chip architectures and operating systems, blade servers held up better than the market at large but declined nonetheless, with shipments down 19.1 per cent and sales decreasing 13.8 per cent. Blades are no longer defying gravity, and that is because enterprise customers have slammed on the spending brakes.

The once booming Eastern European market was singled out as being particularly dreadful in the first quarter, with sales plummeting 47.7 per cent and shipments falling almost in lockstep by 41.3 per cent. Asia/Pacific held up better than other regions, with a 13.5 per cent sales drop and a 12.7 per cent shipment decline. Server shipments in the United States fell by 27 per cent and revenues fought against it, only declining 21.2 per cent. In Western Europe, shipments were also down 27 per cent, but revenues dropped 33.8 per cent.

By Gartner's ranking, IBM came out on top of the server stack in Q1, with $3.12bn in sales, down 20.4 per cent. Hewlett-Packard had its traditional number two spot, with $2.92bn in sales, down 25.8 per cent and hurting more because HP is the market leader with x64 servers, where price pressure is most intense and where almost all of the shipment declines hit.

Dell's server sales in Q1 came to $1.24bn, off 24.7 per cent, and Sun took its number four spot, with $975.5m in sales, down 26 per cent. Fujitsu rounded out the top five, with $598.5m in sales, and the Japanese server giant did relatively better than the pack with only an 18.3 per cent decline. All other vendors in the server racket accounted for $1.31bn in revenues in the quarter, down 28 per cent.

"The outlook for 2009 suggests that it will be a weak year on the whole in the server space," Hewitt said in the statement, "and that from a yearly standpoint, the global server market is unlikely to return to a position of growth until 2010."

This is more or less what IDC said it expects: a similarly awful Q2, a slightly better Q3, and maybe a flat Q4 against an awful compare. And that is if everything goes well. ®

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