Unix, mainframes drag down servers in Q1

x86 machines can't fill the gaps

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The server market is starting to run out of steam, and there's plenty of blame to go around as to why.

According to the box counters over at Gartner, the Unix market is in a slump, IBM is at the tail end of its System zEnterprise mainframe line and customers are awaiting new machines for later this year. The later-than-expected rollout of the Xeon E5 processors from Intel also had a dampening effect on server sales in the first quarter of 2012. You can also lay some blame on the faltering economies in Europe, skittish companies in the United States, and slowing economies in Asia.

During the three months ended in March, Gartner reckons revenues fell 1.8 per cent on a year ago, with the world consuming $12.44bn worth of server iron of all shapes and sizes. Shipments across all processor architectures didn't go into negative territory, but with only 1.5 per cent growth to 2.35 million machines, this is not exactly a sign of strength.

Jeffrey Hewitt, one of the research vice presidents at Gartner who cases the server racket, says that all of the geographic regions in the world at least posted some shipment growth in the quarter – except Western Europe, which had a 6.4 per cent shipment decline. Eastern Europe posted a 16 per cent shipment bump, the best on Earth in the quarter.

As far as revenue growth goes, Japan, which is recovering from the earthquake and tsunami disaster from March 2011, showed the best results, with server sales up 10.6 per cent in the first quarter of this year. Revenues fell across the Asia/Pacific and Middle East/Africa regions.

Gartner's statement on the health of the server market did not say what happened in the United States in terms of shipment or revenue growth, but Hewitt tells El Reg that server shipments in the US rose by 3 per cent, and revenues were essentially flat with two-tenths of a point of growth.

As has been the case so many times in the past, x86 iron defied at least some of the gravity. Shipments of boxes based on processors from Intel and Advanced Micro Devices sporting the x86 instruction set rose by 1.7 per cent, to just under 2.3 million boxes, and revenues for these machines rose at nearly three times that rate, up 5.6 per cent to $8.95bn.

HP pushed out 678,874 of its ProLiant x86 machines (up two-tenths of a point) and pulled in $2.97bn in revenues (down 3 per cent) to handily hold the pole position in the X86 server biz. And Dell, which has been on fire in recent quarters pushing tin, had a bit of trouble keeping the momentum going, with its PowerEdge and bespoke hyperscale servers adding up to only $1.86bn in revenues (down 1.9 per cent) against 503,450 boxes (down a point).

IBM was the third biggest x86 server shipper, with its relevant System x and BladeCenter machines generating $1.33bn in sales (up a half point) against 245,968 boxes (down 2.2 per cent year-on-year). Fujitsu held onto its number four slot in the x86 server market, with 85,210 boxes, up 14.4 per cent, and $382.6m in revenues, up 14.6 percent and obviously doing a lot better than the market at large but still a distant fourth.

Server upstart Cisco Systems, which sells both rack and blade servers using Xeon processors, pushed 40,498 machines, up 70.9 per cent, making it the fifth largest shipper and ahead of Oracle. Cisco did not make the top five ranking of x86 server sales by vendor, but Hewitt told El Reg that Cisco's revenues grew even faster, rising 72.4 per cent to $335m.

"You can't ignore that they are growing and that they will continue to grow," Hewitt says of Cisco. "They are leveraging their existing relationships in the data center. And while their machines are not for everyone, they are for some."

In the RISC/Itanium server market, HP and Oracle continue to decline as they fight it out in the courts about who knew what about the future of the Itanium roadmap and whether Oracle is supposed to be supporting its software on future editions of HP's Itanium/HP-UX iron.

IBM has been raiding the Solaris and HP-UX bases for years now, generating hundreds of millions of dollars per quarter in sales displacing HP and Oracle machinery with Power Systems iron; neither Oracle nor HP talk of Unix displacements, but clearly there are some even if they don't talk about them.

What is obvious is that IBM is growing its AIX business, which was up 4.3 per cent to $1.24bn in the quarter; shipments of Power Systems iron rose by 9 per cent, to 20,210 machines. The RISC/Itanium market has shrunk considerably – only 45.719 boxes went out the door across all vendors in Q1 according to Gartner – and that is one of the key reasons why revenues declined 15.2 per cent to $2.21bn in the Unix space.

It would be very interesting to see if the advent of virtualization has not diminished the number of virtual Unix servers running out there in the world. I suspect that Moore's Law, competition, virtualization, and server consolidation have all combined to crunch Unix server revenues and the number of containers and partitions running an instance of Unix has continued to grow. It's hard to say, but this is precisely what happened to IBM mainframes and AS/400s in the wake of their virtualization.

In any event, the key thing is that neither Oracle nor HP are able to stop their declines in their Unix bases, and maybe HP would have done better to go with its Project Blackbird plan back in February 2009 to buy Sun Microsystems and corner the Unix market.

That didn't happen, and two months later Oracle swept in. Oracle may have a Sparc/Solaris business, but it has not been able to stop the hemorrhaging, and this quarter sales were off 25.7 per cent, reckons Gartner, to $453.8m.

Thanks to the Itanium issue and lawsuit between HP and Oracle, HP's HP-UX/Itanium boxes stomached a 40.2 per cent decline to $382.1m. Fujitsu did even worse by comparison, falling 53.8 per cent to $58.3m; part of that was against a tough compare thanks to the buildup of the "K" supercomputer in Japan. Oracle sold 18,860 Unix boxes in Q1, compared to HP's 5,455 machines and Fujitsu's 1,055.

Other systems, which is mostly mainframes from IBM, Bull, NEC, and Fujitsu, accounted for $1.28bn in sales, down 19.7 per cent, and accounted for a mere 2,256 machines, down 40 per cent. ®

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