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A second opinion on sucky second quarter server sales

Sucks to be non-Xeon, Q4 uptick on the way

Quanta QCT server racks

Global server sales remained in the doldrums during the year's second quarter, says new data from Gartner whose bean counters have found revenues off 2.9 per cent to $12.86bn against a slight 1.4 per cent shipment rise to 2.37 million boxes shipped out to customers between April and June.

The x86 server continues to dominate in terms of server volumes, helped along by Intel's Xeon E5 refresh in March and May, plus and Advanced Micro Devices' launch of its Opteron 4200s and 6200s last November. The x86 sector was therefore relatively healthy despite the world's economic challenges. Indeed, Gartner's crew reckon that x86 server makers shipped 2.33 million machines in the second quarter, a 1.8 per cent increase compared to the year-ago period. Thanks to beefier configurations necessary to support server virtualization, x86 server revenues across all makers rose by 5.6 per cent to $9.19bn.

In terms of sales, Hewlett-Packard was the number one x86 system peddler, with $3.2bn in sales, but falling six-tenths of a point compared to the same period in the past year. Dell ranked second and grew both shipments and revenues, in contrast to both HP and IBM. Dell only sells x86 iron, and piled up just under $2bn pushing its PowerEdge tin in the quarter. It is not a coincidence that Dell got the jump on both HP and IBM in getting Xeon E5 servers out the door; we'll see if Dell's market share gains hold in the third and fourth quarters. IBM brought in $1.24bn in sales, and perhaps its x86 sales were stalled by the launch of its Flex System modular servers (very much like Cisco Systems' Unified Computing System iron) in April, which didn't start shipping until May.

Notably, Cisco has passed Oracle in terms of aggregate x86 iron sold, with 54.5 per cent growth to $376.3m in UCS sales in the second quarter, and Lenovo broke into the top five shippers category with 52,409 machines shipped, up 44.7 per cent year-on-year. It may not be long before Lenovo and Cisco knock Oracle and Fujitsu out of the top five vendor rankings in the x86 portion of the server racket. Oracle had $316.1m in x86 server revenues in Q2, and Cisco has already jumped ahead of Oracle and therefore pushed Fujitsu out of the top five pack in terms of revenues. Notably, Oracle's x86 server sales, driven by sales of Exadata and Exalogic clusters and Exalogic analytics machines, rose by 19.2 per cent

In terms of x86 server shipments, Lenovo has taken out Oracle by moving into the top five position, right behind Fujitsu. Both Fujitsu and Cisco have a long way to go to even catch IBM, which sold 213,263 machines in the period but then again IBM had a 16.5 per cent shipment decline, so Big Blue is making it easier to close the gap.

Meanwhile in Unix-land

Gartner cases the Unix market each quarter in addition to dicing and slicing the x86 market, and unlike IDC does not try to categorize server revenues by the primary operating system that will eventually be installed on it if it has not already been pre-installed. Unix systems based on RISC or Itanium processors accounted for $2.15bn in revenues in the second quarter, down 17.9 per cent.

IBM is the dominant vendor in the Unix server space, and if you think about it, the company has to be a little dismayed that Unix sales have collapsed so much in recent years even if pressure from Windows and Linux means it cannot come as a surprise. Still, IBM was able to bring in $1.2bn in Power Systems sales running its AIX Unix in the quarter, only 4 per cent less than a year ago. Oracle was the number two Unix system player, with $456.7m in sales, but its Unix sales declined 31.9 per cent. Some of that is because the upcoming Sparc T5 launch is stalling sales, some of that is because Oracle is focusing on all of those Exa machines. HP was the number three Unix peddler, with $412.8m in sales in the quarter, down 29.1 per cent, in part due to the impending "Poulson" Itanium 9500 launch and in part due to the fallout from Oracle's decision in March 2010 to not put its database, middleware, and application software on those Itanium 9500 chips.

Add it all up, and HP had $3.75bn in combined server sales in the second quarter after a 5.1 per cent drop, and IBM fell 7.8 per cent to just under $3.5bn. Dell's sales (again, only x86 iron), were up 5.1 per cent to $1.98bn, and Oracle's combined Sparc and x86 server sales came to $772.8m, down 17.5 percent. Fujitsu rounded out the top five, with $494.2m in revenues, but stomached a 41 per cent drop against a particularly tough compare. A year ago, Fujitsu was installing the K supercomputer at the Riken lab for the Japanese government and recognized the revenue from the 10.5 petaflops machine largely in the year-ago period. Other vendors accounted for $2.37bn in sales, up 28.4 per cent and bucking the general trend in the overall market.

In the United States, server shipments were up 8.4 per cent and revenues were up 6.5 per cent according to Gartner, so don't blame America for not shelling out the dough for the next wave of server build outs. Considering that everyone knows mainframe and Unix systems are being refreshed in the second half, it is a wonder that revenues were able to grow at all in the States.

Garter says that in the EMEA region server shipments declined 4.4 per cent to 585,000 units and revenues were off 11.6 per cent to $3.26bn. HP is the dominant vendor by a sizable margin in Europe, with $1.21bn in sales driven by 243,285 boxes. IBM's server revenues in EMEA were off 21.2 per cent, thanks to impending Power Systems and mainframe launches, falling to $843m with a mere 56,637 machines shipped. Dell was third in Europe, with $404.8m in revenues (up 5.6 per cent) against 112,997 machines (up 5.7 per cent). Oracle posted $221.8m in revenues in EMEA, off 22.8 per cent and Fujitsu booked $170m in sales, down 10.2 per cent. Other vendors made up a tiny $404m slice of the market, so you can see where Lenovo and Cisco are not getting much traction.

Server sales in Japan and Latin America were also off in Q2, Gartner said, and sales in the Asia/Pacific region were only up a smidgen. ®

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