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Sometimes, it is not what people say that matters, but what they don't say. The analysts at Gartner and IDC
usually race to call each past quarter's server sales by revenue,
shipments, and platform type. But this time around, only Gartner has
thus far released numbers, and as it did last year at this time, the
company is talking about all four quarters of 2006 instead of singling
out the fourth quarter.
Sometimes, it is not what people say that matters, but what they don't say. The analysts at Gartner and IDC
usually race to call each past quarter's server sales by revenue,
shipments, and platform type. But this time around, only Gartner has
thus far released numbers, and as it did last year at this time, the
company is talking about all four quarters of 2006 instead of singling
out the fourth quarter.
Uh-oh. It looks like the multi-core processors and integrated
virtualization features in modern server platforms might be starting to
have the constricting effects on the server revenue stream that some
people (including me, for many years now) have been predicting it would
have.
Gartner said that server sales actually rose in 2006, up 2 percent to
$52.7 billion. While server makers will be happy about this news, the
server market is continuing to slow. In fact, that growth in 2006
includes a revised global server sales figure that was shifted down a
bit. A year ago, Gartner said that 2005's worldwide server sales
amounted to $51.7 billion, up 4.5 percent from the $49.5 billion level
in 2004. With the slightly revised figure for 2005, that means sales
actually increased by only 4 percent in 2005. In 2004, server sales
grew by 7.2 percent to hit that $49.5 billion figure, and that was only
possible because of a technology upgrade cycle that forced companies
the world over to replace aging equipment from the dot-com boom,
driving up server shipments in 2004 by 20.5 percent to hit 6.7 million
new units. We are still in this replacement cycle, and the continuing
rollout of distributed Web applications is fueling the use of new
servers, too.
Still, crunch time could be starting, even as shipments boom because
companies are upgrading to virtualized, multicore platforms so they can
consolidate physical servers and multiple workloads to remove server
footprints from their data centers. As I have said many times before,
virtualization will probably give an initial burst to the server market
as the base churns from single-core, unvirtualized platforms to
multicore, virtualized platforms, but after that, companies will be
able to swap out processors to add performance and they won't churn
their boxes as often. Moreover, in a virtualized environment, companies
will move workloads around to fill in peaks and valleys in CPU, memory,
and I/O capacity before adding additional resources to an individual
server. And only after that will they go all the way to buying a new
box.
As amazing as it may seem, Gartner reckons that the world consumed an
incredible 8.23 million server units in all of 2006, up 8.9 percent
from the 7.56 million units consumed in all of 2005. But the fourth
quarter--which Gartner did not detail separately within the server
revenue and shipment numbers in its announcement late last week--seems
to have thrown a splash of cold water on some faces.
"The fourth quarter of the year exhibited slower growth in X86 servers
than we have seen in most recent years, which constrained the results
for the year as a whole," explained Jeffrey Hewitt, research vice
president at Gartner. "Most of that slowdown seems to be attributable
to a lengthening of the sales cycle due to the anticipated introduction
of quad-core X86 processors with some lesser impact from X86 server
virtualization."
Hewitt also said that Unix servers based on RISC and Itanium processors
were weak in 2006, with shipments down 1.6 percent and sales down 0.8
percent. While that is not great news for Unix vendors, it is better
than the situation in 2005, when Gartner said that Unix server
shipments were down by 5.3 percent; however, in 2005, Unix server
revenues also climbed by a tiny 0.5 percent.
Hewitt said in his statement that mainframes did pretty well.
"Mainframes had the strongest revenue growth of any segment for the
year, pushing ahead 3.9 percent over 2005." That might sound like a
revenue comparison between 2005 and 2006, but it is actually a
statement about revenue market share point gains for mainframes.
According to Hewitt, IBM's mainframe revenues were up 10.3 percent in
2006. This more than offset the 9.5 percent revenue decline IBM had in
2005 for mainframes, which fell compared to 2004's record sales levels.
(Well, 2004 was a record for the 2000s, but nowhere near the $11
billion to $13 billion in mainframe sales that IBM had in the early
1990s.)
IBM, with $16.9 billion in server sales worldwide and 32.1 percent of
the server revenue pie, was still the largest server maker by revenue
ranking in 2006 according to Gartner's statistics, but growth did not
happen on all fronts. While IBM's System x X64-based rack, tower, and
blade server platforms had 7 percent revenue growth in 2006, the
company's two Power-based server lines, the System p boxes (which
mainly run AIX) and the System i boxes (which mostly run i5/OS) saw
revenues decline by 1.2 percent and 14.1 percent, respectively, for the
year. IBM's Unix business has been growing like gangbusters for the
past decade, and it has pulled even with Hewlett-Packard and Sun Microsystems
in the Unix space. But growth is tough there as the IBM customer base
awaits the Power6 processors for new servers later this year and with
both HP and Sun having revamped and revitalized HP-UX and Solaris
platforms that compete well with IBM's Power-AIX platform on price and
performance. The System i platform, like the mainframe a decade ago, is
falling victim to the virtualization crunch. Customers are
consolidating footprints and using the very good logical partitioning
inside the i5 platform, and that means they are buying fewer boxes and
smaller increments in upgraded processing capacity.
HP was the second-largest server maker in 2006, with $14.2 billion in
sales, down 2.3 percent and giving it a 27 percent share of the server
pie. X64-based ProLiant server shipments rose by 8.5 percent and
Itanium-based Integrity shipments rose by 30.1 percent, according to
Gartner's estimates. Obviously, AlphaServer and PA-RISC shipments had
to decline by more than Integrity sales rose for HP's overall shipment
growth to come in at 8 percent.
Sun finished third in the revenue rankings, with sales up 15.4 percent,
hitting $5.7 billion and giving it a 10.8 percent share. Sun, as you
might imagine, is thrilled to show such revenue growth and to get back
into the third position in the Gartner rankings for 2006, jumping ahead
of Dell
largely because of the good value of its UltraSparc-IV+ servers and the
innovation embodied in its "Niagara" Sparc T1 entry servers and the
"Galaxy" Opteron servers. Still, Sun is a long way from the $9.7
billion in sales it had in 2000, when Dell was less than a third of its
size--not nipping at its heels even after 15.4 percent growth. The
analysts at Gartner said that Dell was right behind Sun in 2006, with
$5.4 billion in server sales (up only 0.4 percent) and having 10.3
percent of the market. The Fujitsu-Siemens partnership finished fifth
in the revenue rankings, with $2.5 billion in sales, down 7 percent.
Dell and Fujitsu clearly have some issues, with their respective meager
growth and decline.
Other vendors combined posted sales of $7.9 billion, up 6.7 percent and
strongly outpacing the market as a whole and all of the top five
vendors except Sun. This reverses a trend in the market for the past
seven years where whitebox vendors were losing share by the handfuls.
But don't get too excited. Whitebox vendors face some pretty tough
compares, too. Back in the 2000 boom year, the server market amounted
to $55.6 billion in sales. The combined HP-Compaq accounted for $15.37
billion in sales, IBM brought in $13.9 billion, followed by Sun with
$9.7 billion and Dell with $3.52 billion; all other vendors (including
the Fujitsu-Siemens partnership) got $13.1 billion in sales. That means
all vendors not in the top four accounted for 24 percent of the server
revenue stream in 2000. In 2006, even with decent growth, the aggregate
base of vendors not in the top four (again, including Fujitsu-Siemens)
accounted for only 20 percent of the market. Rackable Systems
is noteworthy for its 68 percent revenue growth in 2006, but it is
still too small to pull up the average of the whitebox market by all
that much.
In terms of server shipments, HP still rules the high seas and the
ProLiant server is still the king. HP shipped 2.26 million servers in
2006, according to Gartner, up 8 percent from last year and giving it a
27.5 percent share of the 8.2 million servers shipped during the year.
Dell was the second-largest server shipper, with 1.78 million units, up
4.8 percent. IBM came in third, with 1.29 million units and a 15.7
percent share; the company grew shipments almost as fast as HP, at 7.8
percent but still, like HP, grew slower than the market as a whole.
While Sun was able to outpace the market in terms of growth in server
revenues, it did not do it on the shipment side, with shipments in 2006
up only 7.6 percent to 368,603 units, according to Gartner.
Fujitsu-Siemens saw shipments decline by 2.3 percent to 256,794.
Collectively, those whitebox vendors most certainly outpaced the
market, with shipments up 15.9 percent to 2.27 million units. In
aggregate, whitebox vendors just barely outshipped HP. But, alas, they
rake in half as much dough per box, on average, which means they have
to fight for every dollar, euro, yen, ruble, and yuan.
Finally, blade servers. Everybody always wants to know how blade
servers did. Gartner said that blade servers are still a high-growth
market, with sales up 36.5 percent in 2006, driven by blade server
shipments up 33 percent compared to 2005's levels. Any time revenue
growth outpaces shipment growth, it is fair to assume vendors are happy
and making profits, so you know they love it. And given the vendor
lock-in that blade servers allow, you can bet that IBM and HP are
loving blades a whole lot. Gartner says that IBM ended 2006 with 41.1
percent of blade server revenues, compared to HP's 32.5 percent revenue
share. HP's new c-Class machines helped it close a pretty big gap with
IBM--but just a little bit. HP has a lot of lost ground to make up in
the blade server space, and you can bet that Sun and Dell are not
interested in making that task any easier.
Read the original article: http://www.itjungle.com/tfh/tfh022607-story03.html
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