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IBM reclaims server crown from HP

Mainframe resurgent

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IBM has stolen the server crown back from rival Hewlett-Packard.

For the past five decades, Big Blue was the top systems seller based on revenues. But then along came the Great Recession, hitting at the same time as transitions in the Power Systems and System z product lines, allowing HP to reach down and steal the crown away. But now it's back.

So how long will IBM be able to hold it this time?

The box counters at Gartner reckon that server buyers bought 2.38 million servers in the fourth quarter, a 6.5 per cent boost in boxes compared to the number that went out the door in the final quarter of 2009. Because of a rebound in heavier server configurations – driven in part by fatter x64-based machines setup for server virtualization and surging mainframe sales in the wake of the launch of the System zEnterprise 196 machines last July and their shipment in late September – aggregate server revenues were up by 16.4 per cent, to $14.68bn.

For the full 2010 year, server makers pushed out 8.84 million machines, an increase of 16.8 per cent over 2009, but revenues hit only $48.8bn, rising only 13.2 per cent because of a mainframe slump in the first three quarters of 2010 and an ongoing slump in RISC/Itanium Unix system sales that started ahead of the Recession.

"2010 was a year that saw pent-up x86-based server demand produce some significant growth on a worldwide level," explained Jeffrey Hewitt, research vice president at Gartner, in a statement accompanying the server market stats. "The introduction of new processors from Intel and AMD toward the end of 2009 helped fuel a pretty significant replacement cycle of servers that had been maintained in place during the economic downturn in 2009."

The growth in server spending was highest in North America, rising 24.5 per cent year-on-year, followed by the Asia/Pacific region, with 22.4 per cent growth. Latin America had 12.3 per cent growth in aggregate server spending compared to 2009, while Europe, the Middle East, and Africa had a less stunning 10.4 per cent growth rate. Japan, which has never successfully got out from under its own economic collapse in the early 1990s, actually saw a 4.4 per cent decline in server spending in 2010.

In the fourth quarter, IBM shipped only 332,254 boxes (up 3.8 per cent), according to Gartner, but the higher prices that Big Blue commands for its mainframes helped boost revenues to $5.21bn (up 26.4 per cent). I doubt IBM or anyone else thinks the mainframe boom can be sustained at this level, but it probably feels pretty good when it happens. HP was the top system shipper, with 767,026 boxes going out its factory doors (up 6.9 per cent and slightly above the market average), but because HP peddles less expensive x64 iron for the most part, the company's revenues only hit $4.46bn. That said, HP still grew sales by 12.8 per cent, which is not bad for a commodity server business.

However, Dell did much better on a pure commodity x64 server play, with shipments up 6.3 per cent, to 515,274 boxes, in Q4 2010 but with revenues growing right along with IBM's 26.4 per cent pace to hit $1.92bn. HP lost a point of revenue market share and Dell caught it, basically. IBM gained nearly three points of revenue share, and will likely gain share in the first quarter and maybe the second quarter of 2011 as well. But at some point, pent up demand for mainframes will run out and Big Blue will have to start doing deals, driving down revenues per machine.

Oracle continues to bleed like a stuck pig in the server biz. Gartner believes that Oracle's server business declined by 16.2 per cent in the fourth quarter of 2010, to $805.6m, when everyone else was doing swimmingly. Oracle's box count fell by 40.8 per cent, to a mere 36,614 machines. No matter how big the pipeline might be for Exadata, Exalogic, and SuperCluster appliances, this pipeline is not resulting in a rebound in Oracle's server business.

Oracle said it was going to walk away from unprofitable server deals, and presumably it is making money on the much-diminished Sun Fire and Sparc Enterprise M servers it does sell. The fourth calendar quarter of 2009 was the last one that Sun Microsystems did as a free-standing company, so it is not exactly a fair comparison. But the first quarter of 2011 sure will be, and Oracle had better show some growth this year or co-founder Larry Ellison will be taking questions about how Oracle has failed at the server business.

Oh, wait. I forgot. Oracle doesn't take questions. It just makes pronouncements. And money, of course.

Oracle's partner in the server racket, Fujitsu, rounded out the top five, with $560.4m in sales (down a half point) against 75,716 shipments (up 12.4 per cent and growing twice as fast as the market at large in terms of shipments).

Other vendors - including Cray, Silicon Graphics, Super Micro, and a host of whitebox vendors - managed to wrest $1.72bn in revenues away from the top five, almost matching the overall market with 15.8 per cent revenue growth. These other companies shipped an aggregate of 654,544 boxes, up 12.1 per cent from the year-ago period.

Gartner believes that a paltry 55,249 RISC/Itanium machines were sold in the fourth quarter of 2010, a decline of 10.7 per cent. But these machines generated $2.97bn in revenues, down nine-tenths of a point. The box counter believes that IBM's Power Systems running AIX had a 10 per cent revenue bump, hitting 1.33bn, compared to HP's Unix system sales of $829.2m (down 5.4 per cent), Oracle's $637.3m (down 15.5 per cent), and Fujitsu's $77.4m (up 20.3 per cent). French server maker Bull, which resells IBM Power Systems gear, had $67.7m in sales, down 11.9 per cent. Other Unix system makers accounted for $24.2m, double from a year ago.

X64-based iron continued to be the revenue and shipment driver in the server space, 2.32 million boxes generating $9.11bn in revenues. Shipments for x64 boxes rose by only 7.1 per cent in the quarter, but revenues rose by 20 per cent as companies fatten up their boxes for virtualization. HP maintained its top spot in the X64 space, with 754,503 boxes driving $3.43bn in sales.

Dell's business is all x64 iron, and its stats gave it a solid number two position here but it is still nowhere near to catching HP - even with all the units that its Data Center Solutions bespoke server division is kicking out for hyperscale data center customers. IBM's x64 server shipments stalled in Q4, but its memory-heavy System x and BladeCenter machines seemed to do well, helping push its x64 server revenues up 18.1 per cent to $1.69bn. ®

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