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Global server sales just under $13 billion

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November 29, 2011

According to fresh new numbers just released by Gartner, global shipments of new servers grew only 7.2 percent to 2.37 million units, while revenues rose only 5.2 percent to just under $13 billion.

Nevertheless, the quarter was still without a doubt one of the best third quarters in recent memory, and places the server market more or less back to the same shipment and sales levels it enjoyed before the Great Recession bestowed upon us in late 2007, and especially in the third quarter of 2008.

But it probably should have fared better, given how old some of the servers are out there in various data centers around the globe.

Overall, Gartner laid some of the blame for weaker shipment and revenue growth on stringent compares and regional economic difficulties. But it could also be that buying enthusiasm was dampened by the impending launch of the Opteron 6200 processors from AMD, which came out just two weeks ago, and the Xeon E5-S from Intel, which have been shipping since September in limited quantities to selected customers, and which are not expected to be officially launched until early 2012.

"The third quarter of 2011 produced growth on a global level but there was some significant variation in growth by some regions," explained Jeffrey Hewitt, a research vice president at Gartner, in a statement accompanying the new server numbers.

"All regions showed growth in both shipments and vendor revenue except for Western Europe which posted a 4.9 percent decline in revenue for the period. Asia/Pacific grew the most significantly in shipments with a 23.9 percent increase. Eastern Europe posted the highest vendor revenue growth at 27.4 percent for the period," said Hewitt.

On average, the x86 server still remains the workhorse of the whole market, with sales very close to $9 billion, up 9.3 percent, and global shipments hitting 2.32 million, up by 7.6 percent.

Hewlett-Packard, which has been suffering since the early summer with all kinds of restructurings and reorganizations, and now headed by its new CEO, Meg Whitman, saw its ProLiant x86 server sales flatten to $3.13 billion, with shipments actually down 2.9 percent to 684,230 servers.

Dell, which was the number two x86 vendor in Q3, pushed 517,867 machines and raked in about $1.9 billion in sales. But the Texas company grew significantly slower than the market at large. In addition, IBM's System x and BladeCenter division was anemic to say the least, growing sales only 1.1 percent to $1.5 billion and shipments up only 0.7 percent to 268,394 servers.

So what's been happening you may ask? Fujitsu and Cisco Systems are taking market share, that's what's been happening as of late, although Fujitsu is probably a bit ahead of Cisco in the total amount of servers sold during the same period.

Fujitsu's x86 server sales rose by 9.1 percent to $349.5 million, and shipments were up 5.6 percent to 77,796 units. For its part, Cisco Systems, which only sells servers based on Intel's Xeon processors, pushed out 39,800 blade and rack servers in the quarter and nearly tripled revenues to $268.3 million.

Cisco has no doubt taken a little piece out of the x86 server share of HP, Dell, and IBM, although it's still too early to make any guess as to the overall trend, since Cisco is still fairly new to the server game.

Having acquired the PC business of IBM in 2004, Chinese maker Lenovo is also making some headway, nearly doubling its shipments of servers in the quarter. At that rate, it will be as big a player in x86 hardware as Fujitsu next year, and will most likely have already surpassed Oracle in the x86 segment of the market.

In the RISC-Itanium space, for which Gartner provides some separate statistics for it in its public quarterly reports, Oracle is shrinking but is still the top Unix system shipper for now. However, it will be interesting to see if that trend will continue and for how long.

The Unix market consumed only 45,696 servers in the third quarter, down 6.8 percent from the year-ago period, and those units accounted for about $2.43 billion, up 3.5 percent. Nearly all of that Unix systems' revenue growth can be attributed to IBM selling bigger Power Systems, which boosted its Unix revenues by 27 percent to $1.21 billion. From the getgo, Big Blue has always been and continues to be a strong contender when it comes to Unix and Linux servers, and we expect that trend to even intensify going forward.

By contrast, Oracle saw Unix system revenues drop by 11.6 percent to $550 million, while HP fell by 18.5 percent to $540 million.

Fujitsu, which had a bumper second quarter thanks to the delivery of its 'K' Supercomputer to the Japanese government, adding approximately $400 million to its server sales in Q2, went back to its normal self in RISC/Unix servers in Q3, with shipments down 35.8 percent to 1,096 systems and revenues down 15.3 percent to $65.1 million.

The K super is a parallel RISC machine, but it runs Linux, not Solaris, so it doesn't show up in the Unix data from Gartner.

If you extract all of the other server platforms out of the numbers, servers not based on x86 chips and not running Unix on either RISC or Itanium architectures accounted for about $1.54 billion in revenues in the third quarter, down 12 percent, with shipments off 39.6 percent to just 2,958 systems.

However, the average selling price of those servers actually rose by 45.7 percent to $519,727. That is why proprietary machines are still sold by vendors, although in dwindling numbers and with slackening revenue streams.

IBM must have had some pretty big mainframe deals, because ASPs (average selling prices) were up 69 percent to $715,110 in its others category. Nonetheless, IBM's other system sales fell by 11.3 percent to $1.14 billion.

And if you add it all up, HP's issues let IBM just out ahead of it in the race for server dollars in the quarter. Big Blues's overall server sales rose 3.5 percent to $3.85 billion and HP's fell by 3.6 percent to $3.8 billion.

Dell ranked third behind by total revenue, with $1.9 billion in sales, up 6.3 percent, and Oracle came in fourth, with $763.6 million in sales, flat from a year ago.

Fujitsu held its fifth spot on the Gartner server charts, with $603 million in sales, up 3.6 percent. Other vendors accounted for $2.05 bilion in sales, up 33.6 percent, boosted significantly by Cisco and supercomputer maker Cray, which hauled in some very big deals in the third quarter.

Looking ahead to Q4, Hewitt says that he is wondering if the x86 server build-out among service providers and cloud computing providers will continue the way it is now. And while Hewitt says Intel is great at providing incentives to server makers to keep sales humming between product transitions, the fourth quarter could present some issues, given the expectation of a Xeon E5 launch early next year.

To counterbalance that effect, Intel will be booking a whole slew of Xeon E5 sales to the cloud and HPC customers in Q4 ahead of the launch. Hewitt was confident enough in the current state of the economy in North America to say that x86 server revenues and shipments will be up in the low-to-middle single digits, with shipments outpacing revenues as they have all year.

"I don't expect a downturn," says Hewitt. "Will there be huge growth? I don't think so." Outside of the x86 market in North America, Hewitt didn't want to make too many predictions because there are so many different economic and political uncertainties in so many regions of the world right now. China will continue to grow, Western Europe will continue to have issues, Brazil will be the powerhouse of Latin America as it has been since the past five to six years, and some Eastern European countries will also spend more money on servers.

Hewitt stopped short of pinning down a precise forecast for global server sales and shipments, given all the variables. In the fourth quarter of last year, server makers sold 2.38 million machines, up 6.5 percent, and brought in $14.7 billion, up 16.4 percent, thanks in large part to an IBM mainframe and Power Systems refresh cycle and a truly huge jump – 20 percent – in x86 system sales to $9.1 billion.

Source: Linux News Today.

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