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Server Revenue Slips In Q3: Gartner

Server shipments are slightly up but revenues are down in the third quarter, and Unix server sales continue to slide, says Gartner report.

It's not a good year to be in the server business. Pity especially the poor Unix server salesperson in Europe.

Gartner on Wednesday released third-quarter server market estimates that show that total worldwide shipments were up 1.9% from the prior-year quarter to just over 2.5 million units while total server revenues were down 2.1% to $12.3 billion.

"The worldwide server market remains in a relatively weak performance mode as we move through the second half of the year," said Jeffrey Hewitt, research vice president at Gartner, in a statement.

Server revenues grew strongly in the Middle East and Africa (up 12.1%) and modestly in Canada (up 6.5%), but were flat or declined in all other regions. Europe once again suffered the steepest declines.

[ Want more on the impact of slow server sales? Read IBM Hardware Slide Drags Down Q3 Results. ]

"Revenue [in Europe] has now declined for nine consecutive quarters and shipments have declined for eight," said Gartner research director Adrian O'Connell. "Server revenue across EMEA is at its lowest level for over 15 years, which underlines the increasing contraction of the server market."

Looking at results by product category, RISC/Itanium Unix servers once again suffered a steep decline, a pattern that has persisted throughout the year. Unit shipments in the category were off 4.5% from last year while revenues declined a whopping 31%.

"The fourth quarter is typically the strongest quarter of the year for [RISC/Itanium Unix] platforms, but even a strong end to the year will not change the long term downward trend," said O'Connell.

Some IBM customers are consolidating Unix workloads onto mainframes, but the bigger trend is the migration from Unix to x86 platforms. That's a choice that the University of Kentucky (UofK) is contemplating as it considers hosting its SAP applications, which currently run on Unix, in private clouds.

"Right now we run on IBM P Series, and we want to potentially move to an Intel platform that would be more friendly to certain cloud providers," said Vince Kellen, UofK's CIO, in an interview with InformationWeek. "We might have on-premises processing and a bunch of off-premises processing, so we have to be able to run workloads in both locations."

UofK's decision to move from P Series to x86 will depend in part on price, said Kellen. "If IBM comes to us with a price that is extremely competitive and gives us cloud advantages, then we'll be all over it."

It appears IBM might be cutting deals in the interest of gaining marketshare. IBM was the only Unix-class server manufacturer among the top five to report increased unit shipments. IBM's Q3 shipments rose 19% from from the prior year to 14,611 units, but its revenues in the category were off 29.8%, according to Gartner.

Looking across all categories of servers, HP maintained its lead among all vendors with modest increases in both shipments and revenues (see Tables 1 and 2). IBM suffered the biggest drops in unit shipments and revenues. It could not have helped that IBM's X86 server business was being shopped to Lenovo in the first half of the year. That deal fell through, yet employees and customers of the unit must still have uncertainties about the future.

The best performances in the server market were turned in by vendors that are new to the market. Cisco reported a 42.7% increase in server revenues and now has 6.1% of the x86 market, up from 4.5% in the third quarter of 2012. Chinese manufacturer Huawei had a 202% increase in unit shipments over the same quarter last year, and it now holds 2.8% of the x86 market. Huawei accounted for less than 1% of x86 server shipments in the third quarter of 2012.

IT groups need data analytics software that's visual and accessible. Vendors are getting the message. Also in the State Of Analytics issue of InformationWeek: SAP CEO envisions a younger, greener, cloudier company. (Free registration required.)

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D. Henschen
D. Henschen,
User Rank: Author
12/5/2013 | 9:46:29 AM
Unix death spiral?
The Unix server stats are pretty grim. IBM was up in units but down in revenue as described above. Oracle was -22% on units and -25% on revenue. HP was -22% on units and -37% on revenue. Fujistu was -16% on units and -33% on revenue. IBM's answer is to adapt its Power Servers to Linux workloads, but x86 is all over Linux as well.
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