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Storage sales remain flat, but prices stabilize

Storage sales remain flat, but prices stabilize

General Interest Dec 6,2003 0

Global sales of disk storage systems slipped slightly in the third quarter, said research firm IDC Friday, but the downturn in revenues is actually an improvement over past performance by storage vendors. In its most recent quarterly report, IDC noted that worldwide disk storage system revenues totaled $4.8 billion in the July through September period, a 0.03 percent drop from 2002's third quarter.

Compared to the second quarter numbers, however, the 0.3 percent year-to-year decline was actually good news. In the second quarter of 2003, total sales were off 3.9 percent over the previous year, down to $4.73 billion.

The figures indicate that the worst is over, said Charlotte Rancourt, IDC's director of disk storage systems research. "I think the market has finally bottomed out."

But even with the slightly improved news on revenue, demand for storage continues to remain soft. "Frankly, I don't expect it to return to the kind of system growth rates that we've seen historically," Rancourt said. "The market is changing. Instead of dollars flowing into storage hardware, they're going into software and into services to manage storage."

The total disk storage system capacity shipped in the quarter, for instance, grew by what IDC characterized as "modest" 36 percent, year over year, and accounted for 197 petabytes. In the second quarter, vendors shipped a total capacity of slightly less: 181.6 petabytes. The rate of capacity growth has declined in each of the last four quarters over the previous year, according to IDC.

This fall-off in capacity sold doesn't mean that enterprises are using less storage -- far from it, said Rancourt -- but that they're using what they have more efficiently.

"With the advent of networked storage, a lot of capacity that had been sitting around unused in the enterprise has been consolidated," she said. "That's a permanent efficiency gain."

The brightest news in the third quarter for storage makers, IDC analysts agreed, is on prices. "Price declines have moderated, and remained below 30 percent year-over-year for the last two quarters," added John McArthur, IDC's group vice president of storage hardware research. Instead of waging price wars, vendors are stressing higher-value software, services, and application integration to gain a competitive advantage over rivals.

"The price wars are over," Rancourt chimed in.

In the overall disk storage market, Hewlett-Packard continued to lead all other vendors with 26.4 percent of the global revenue share. IBM and EMC followed in the number two and three spots, with 21.1 and 12.9 percent of the sales pie, respectively. Dell, Hitachi, and Sun round out the top six storage system sellers. Dell and EMC posted the largest year-to-year gains during the third quarter, but those numbers are somewhat deceiving, according to IDC, which noted that EMC's sales in the same quarter last year were extremely weak as the company readied its newest line of Symmetrix systems, and that Dell's sales rely, at least in part, on EMC-branded hardware.

IDC also split out sales figures for the networked storage market, which takes into account network attached storage (NAS) devices as well as storage area networks (SANs).

Network Appliance and EMC were in a dead heat in the NAS arena, said IDC's numbers, with the former slightly edging the latter in revenues by $6 million. EMC, however, gained ground on its rival by accounting for 35.4 percent of the NAS market as Network Appliance slipped slightly to 37 percent.

HP, meanwhile, continued to rule the SAN roost with 31.2 percent of the market, followed closely by EMC with 27 percent.

Sales of SANs were up significantly in the third quarter, according to IDC; the market grew 15.7 percent over the same quarter last year. All of the top three SAN vendors -- IBM placed third -- behind HP and EMC -- gained market share.

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