Gartner report card gives high marks to x64, blades

After Dell and Hewlett-Packard reported their financial results for their most recent fiscal quarters last week, the box counters at Gartner and IDC could tweak their models to figure out how the server makers stacked up in the final quarter of 2009. Gartner got its grading done first and handed out report cards today.

As we already went through in detail earlier this week with our analysis of how the big three server makers - IBM, Hewlett-Packard, and Dell - did in their most recent quarters, the rebounding of X64 server sales in Q4 helped push shipments back up to somewhat normal levels.

More than 2.23 million boxes went out the door, up 4.5 per cent from the final quarter of 2008. But don't throw a party yet, as overall server revenues fell by 3.2 per cent to $12.6bn.

"The recovery that began in the third quarter of 2009 based on x86 servers extended into the fourth quarter," said Jeffrey Hewitt, research vice resident at Gartner, in a statement accompanying the figures. "However, it is important to put this into context. The fourth quarter of 2008 was quite weak, so the fourth quarter of 2009 did not have to produce huge x86 server numbers to result in an increase. At the same time, other segments like RISC/Itanium Unix and mainframes remained constrained and that exerted downward pressure on overall vendor revenue results."

By Gartner's estimate, X64 server shipments rose by 6.3 per cent to 2.16 million units, and revenue, thanks to virtualization driving heavier configurations, rose by 14.3 per cent to $7.59bn. In the x64 space, IBM was clearly the most improved, with shipments up 14.6 per cent to 293,716 units and revenues shooting up a stunning 37 percent to $1.43bn by Gartner's reckoning.

IBM still has a long way to go in the x64 racket to catch HP, though, which peddled 704,929 boxes (up 4.8 per cent) and brought in $2.88bn in revenues (up 15.7 per cent). Dell - which still sells a lot more x64 boxes than IBM in any given quarter and which pushed 484,702 units in Q4 (up 4.4 per cent) - is not all that far ahead of IBM in terms of revenues, with $1.52bn in sales (up 8.3 per cent). Fujitsu was the number four x64 vendor in the fourth quarter, as it has been for many years, and sold 65,711 boxes (slightly lower than the class average in terms of growth) but bringing in $287.8m in sales (up 17.1 per cent).

Unix server sales on RISC and Itanium iron continued to be a drag in the fourth quarter, and not just because Oracle was in the middle of trying to buy Sun Microsystems. Gartner figures that the number of RISC/Itanium machines dedicated to running a flavor of Unix fell by 30.5 per cent in Q4, to 62,076 units. Even with virtualization-driven server consolidation, which compels companies to buy beefier Unix boxes, revenues for Unix gear fell by 20 per cent to just a hair under $3bn.

Sun was the top Unix shipper, with 28,885 units, according to Gartner, but that represented a 38.5 per cent decline over the previous year and only netted Sun $753.8m in revenues (down 29.1 per cent and making it the number three seller of Unix gear). IBM held onto the top spot in the Unix racket with $1.21bn in sales, down 11.1 percent, pushed by 20,407 shipments, down 20.1 per cent. HP had second position in Unix, with $876.3bn in sales on a much skinnier 10,700 shipments (both down 20 per cent compared to a year ago).

Gartner did not break out blade servers with much detail, but it did say that blade server shipments were up 11.11 per cent in the quarter and revenues rose at twice that rate. So, however slowly, blades are getting something closer to their fair share of server sales - based on the benefits blades offer, balanced against the vendor lock in they engender.

All told, IBM remained the revenue market leader in Q4, with $4.12bn in sales, down 5.9 per cent, and HP remained close behind with $3.95bn in sales, up four-tenths of a per cent. Dell came in third with its $1.52bn (up 8.3 per cent), and Sun ranked fourth with $960.8m in server revenues - down 23.5 per cent and saved in large part by a 17.1 per cent boost in x64 sales, to $287.8m, in the quarter. Fujitsu rounded out the top five with $563.4m in revenues, up a half a point from the year-ago period.

Server shipments in the United States were up 9 per cent, but revenues declined by 5.1 per cent, so you can see that the recovery is not exactly roaring here in the US. Shipments in Canada were down 9.4 per cent and revenues were down 1.7 per cent, and Western Europe had a 4 per cent drop in boxes sold in Q4 and a 9.2 per cent revenue dip. Asia/Pacific (including India and China but not Japan) had a 19.6 per cent jump in servers bought in the quarter, and a 9.1 per cent rise in aggregate server revenues.

Eastern Europe, formerly one of the darlings of the server makers, stomached a 13.3 per cent decline in servers sold and a 26.2 per cent decline in server revenues across all vendors and types of boxes. Japan had a more muted 1.7 per cent shipment decline and a 6.7 per cent drop in revenues. The market was choppy in Latin America, but steady in the Middle East and Africa.

For the full year, Gartner says server shipments fell by 16.6 per cent, to 7.56 million units, driving revenues down 18.3 per cent to $43.1bn.

Garter's best guess right now for 2010 is that server shipments might grow in the mid-to-high single digits, with revenue growth at a slightly lower level. The virtualization effect is holding back shipments and revenues even as it helps drive sales.

The real question is what happens to shipment demand and revenues when we move from 25 per cent of x64 servers being virtualized to somewhere around 90 per cent, which is probably the practical upper limit. It will take several years to get there, of course, and there is a lot of money to be made in the meantime. But a revenue downdraft once virtualization is the norm in data centers could be substantial, unless companies go nuts creating zillions of virtual servers. ®