Oracle says new Sparc servers beat IBM's Power line, but gains in a shrinking market aren't likely to stanch hardware losses.
Oracle on Tuesday announced a complete refresh of its midrange and high-end Sparc servers for Unix, touting 2X to 10X performance gains and claiming significant speed and cost advantages over IBM Power servers. The question is whether these new servers can turn around Oracle's sliding hardware sales?
The new servers include the midrange T5-2, T5-4 and T5-8, which replace prior-generation T4 servers, and the M5-16 and M5-32, which replace prior-generation M9000 series servers. ("T5" and "M5" are the new chips while the "-X" designations refer to the number of sockets.) At an unveiling event in San Francisco, Oracle CEO Larry Ellison said the T5-series follows a pattern of doubling performance with each new Sparc chip release since Oracle acquired Sun for $7.4 billion in 2009.
"People thought the Sparc microprocessor was a laggard and that we would never catch up," Ellison said. "Well, we've done better than catch up. We've passed Intel [X86 in performance], we've passed IBM Power, and the T5 is now the world's fastest microprocessor."
Oracle claimed 17 world records for the T5-8, including fastest single server for Oracle database and fastest single server for Oracle middleware. The M5-32 server is said to be 10 times faster than the previous-generation M9000 server it replaces. Ellison shared at least half a dozen comparisons to IBM Power servers claiming significant performance and cost advantages for the new Sparc products.
IBM declined to comment on Oracle's claims, but IBM chief technical strategist Elisabeth Stahl wrote a personal blog post on Tuesday that "most of the claims are Oracle's own benchmarks that are not published and audited."
The tenor of Oracle's attacks on IBM Power products followed much the same script as those leveled during the T4 launch in September 2011 -- albeit with the fresh price and performance figures inserted. Nonetheless, the T4-series failed to reverse a market share slide for Oracle in the Unix server market.
Among the top five RISC/Itanium server vendors -- with IBM, Oracle, HP, Fujitsu and Groupe Bull essentially representing the entire market -- Oracle's unit market share declined 22.8% from the prior year to 37.7% in 2012, according to Gartner statistics. The company's revenue in the segment was down 30.7% from the prior year. By comparison, IBM unit shipments dropped 4.6% and revenue declined 6.2% from the prior year in 2012, but IBM surpassed Oracle on unit shipments and reached 46.1% market share, according to Gartner.
Third-place vendor HP suffered a 35.4% drop in unit shipments and a 34.4% drop in revenue from the prior year in 2012. That decline was exacerbated by Oracle's move to drop database and applications support for HP's Itanium servers -- a decision since reversed by court order.
The larger concern for all vendors in the RISC/Itanium server business is that the entire segment suffered a combined 17.7% decline in unit shipments and a 19.0% drop in revenue in 2012. It was the latest example of a years-long trend toward lower-cost X86 severs, which are steadily gaining in performance. Indeed, X86 server shipments totaled 9.5 million units in 2012, while RISC/Itanium shipments totaled only 154,870 servers.
Midrange and high-end RISC/Itanium servers do fetch higher prices and profit margins than X86 servers, so manufacturers show no sign of abandoning them. Ellison said Oracle would continue to push performance improvements in the Sparc line by moving certain database and Java functionality into silicon. That would certainly bring performance advantages to Oracle software customers, but Ellison and John Fowler, Oracle's executive VP of systems, also cited performance gains with third-party software from the likes of Informatica, SAP and SAS.
The hardware business acquired with Sun Microsystems has steadily lost market share since it was acquired by Oracle. Hardware systems suffered an 11% decline in revenue in fiscal year 2011 and a 13% decline in revenue in fiscal year 2012 (both in constant currencies). Oracle executives have said all along that the company is intentionally reducing sales of commodity X86 products in favor of more profitable Sparc servers and Exa-series engineered systems.
But Ellison and Oracle president Mark Hurd both predicted that hardware sales would stabilize and return to growth in fiscal year 2013 -- a turnaround that has yet to materialize. Oracle last week reported that hardware systems revenues were down 22% from the prior-year period through the first nine months of fiscal 2013 (in constant currencies for the period ending February 28).
The bottom line is that these five new servers must overcome diminishing sales in the RISC/Itanium server market overall and must reverse a market share slide against IBM Power servers if Oracle is to have any hope of returning to growth in the hardware business. That's too much to expect.
Server Market SplitsvilleJust because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.