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Wednesday, December 08, 2010
Workstation Market to Strenghten, Says JPR

The workstation market continued its steady determined march back to the volume levels it saw prior to the economic collapse that kicked off in the fourth quarter of 2008. Jon Peddie Research reports the industry shipped 849.7 thousand workstations in Q3'10, representing a robust 31.8% year-over-year growth.

Most importantly, given analyst Alex Herrera's expectations and hopes for the quarter, Q3 was Goldilocks-ideal: not too hot, not too cold. Sequential growth slowed a bit to 6.9% (from the perhaps-a-little-too-hot 9.6% gain in Q2), showing some moderation the analyst expected should reduce the potential for a double-dip recovery. But the number was still stronger than what the firm would expect by typical quarterly cyclical norms, illustrating the recovery is still solidly headed in the right direction.

HP was decidedly back on top as workstation volume leader in Q3'10, mimicking the surge over Dell the company achieved back in the third quarter of 2009. But one quarter after the firm announced HP as the new undisputed workstation leader, Dell bounced back to put the two in a virtual deadlock, a position they've been in since. Now the books are closed on Q3 of 2010, and HP's opened up another appreciable gap, taking 40.5% of the market to Dell's 37.5%.

But this time, Herrera is holding off handing HP the out-and-out crown, pending Dell's response over the next quarter or two. Either way, it's clear HP is continuing to move aggressively forward in workstation business. The question is not so much about where HP's fortunes are headed, but more whether Dell is willing - and the firm believes it's able, provided it's willing - to keep up.

The market for professional graphics hardware takes that "double-dip" in Q3'10, but there's more to the story than first appears.

In the workstation-related market for professional graphics hardware Q3'10 provided more of the slowing volume JPR had expected and seen in the second quarter. But more accurately, Q3 went beyond mere slower growth and gave us an unexpected dip. Worldwide, units totaled 1.14 million, down a 9.5% sequentially, beyond any typical cyclical norm.

But while technically the market did experience the dreaded "double-dip", a closer inspection revealed two sides to the Q3'10 coin. Herrera believes the second dip was likely more symptomatic of exaggerated cyclical conditions than an indication of another substantial dive for both graphics and workstations. Because by no means was the whole professional graphics market down. Mobiles were essentially flat, and there was good news to be found in the near 9% sequential growth of 3D cards (as both Nvidia and AMD were ramping new generation models).

And that left the 2D card sub-segment as the primary culprit dragging down the overall market. 2D cards dropped precipitously, down to 333.6K from the 497.5K in Q2 the previous quarter. With past 2D shipments likely running a bit too hot for the market to digest, a short-term dip - even one dramatic - is likely not indicative of any longer-term trends, particularly in light of the growth in the substantially higher revenue segment of 3D cards.

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