IBM Power Systems Sales Grow Amid Unix Server Slump

The performance of IBM's Power Systems line was a bright spot in an otherwise turbulent server market, but the prospects for the Unix market as a whole look as bleak as ever.

Big Blue's Systems and Technology Group (STG) didn't exactly light things up in the final quarter of 2011. According to separate tallies from market watchers Gartner Inc. and International Data Corp. (IDC), the STG group posted between a 7.5 and a 10.2 percent year-over-year decline in Q4.

Although IBM Corp. didn't match its performance in the year-ago quarter, it nonetheless managed to outpace its competitors, controlling almost 37 percent of the overall server market.

Big Blue's STG unit has its Power Systems line to thank for its gritty performance, and the success of Power Systems is a story unto itself.

At a time when the Unix server market -- as distinct to the thriving Linux server space -- continues to contract, IBM's Power line has been a consistent growth engine. According to Big Blue, the company posted 15 consecutive quarters of positive growth. In the final quarter of 2011, for example, Unix sales plunged 10.7 percent, year-over-year.

Power Systems isn't a Unix-only proposition, of course. Back before IBM merged its System i and System p lines in early 2008, its System p AIX line was expanding at the expense of its Unix rivals. System i was a consistent performer, too -- so consistent, in fact, that most i advocates felt that it would have performed even better were IBM committed to promoting it (or as committed to promoting System i as it was to System p).

It's a safe bet that Power Systems' growth isn't coming at AIX's expense: if Power's growing, it's because IBM is moving AIX boxes. Demand for OS/400 might be consistent, but it isn't a growth catalyst -- and a bump in demand for OS/400, by itself, wouldn't be enough to offset losses on the AIX side.

IDC's market tally confirms as much, noting that Power Systems posted a 2.5 percent increase, year-over-year, in Unix server revenues. At the same time, Big Blue grew its share of the Unix server market by almost 8 percent. That's strong performance in almost any context -- and a particularly impressive showing at a time when the Unix market as a whole dropped by double digits.

In his summary of IBM's Q4 performance to financial analysts, IBM CFO Mark Loughridge specifically singled out Power Systems. "Within Hardware, Power Systems was up 6 percent as we continue to drive competitive displacements," Loughridge told analysts. "We've now had 15 consecutive quarters of share gain in UNIX. In fact, with the exception of mainframe, which was coming off of the biggest quarter in its history last year, each of our 16 brands across the company gained or held share."

Gartner's public summary of the Q4 server market doesn't delve into Unix, but IDC's does. Putting aside Power's strong performance and Unix's double-digit decline in Q4 revenues, the trend line for RISC/Itanium Unix hasn't been rising for a long time.

"The Unix server market has not returned to pre-recession levels due to a new set of market dynamics," said Jean S. Bozman, an IDC research vice president and a long-time server market observer, in a prepared release. "Fourth-quarter results show that Unix servers generated 24 percent of quarterly revenue share, and 21.8 percent of 2011 annual server revenue share, compared with 31.6 percent market share [three years ago] and 30 percent of annual revenue share in [calendar year 2008]," she continued.

Q4 of 2008, which Bozman references, was a positively brutal period for the enterprise server market. According to IDC's own calculations, server sales crashed, falling 14 percent. Unix sales, however, declined less drastically than did those of other platforms (Unix was down by just 6.2 percent, less than both Windows and Linux). Still, four three years ago, Unix still accounted for almost one-third of all server sales. Not any more: "Intense competition between the top 3 Unix server vendors -- IBM, HP, and Oracle -- and erosion of overall Unix server market share due to platform migration have combined to reduce worldwide Unix server revenue in the fourth quarter of 2011."

Linux isn't derived from the Unix System V codebase, but -- for all intents and purposes -- it's a Unix operating system. Based on IDC's data, it's the great hope for Unix, excepting the AIX variant of IBM's Power Systems line. According to IDC, Linux is creeping ever closer to 20 percent of the overall server market: in Q4 of 2011, for example, it accounted for 18.4 percent of all server revenues, up 2.2 percent year-over-year. Linux's longer-term trends, unlike those of Unix, also look promising: it's up 1.7 percent from Q4 of 2010 and up 31 percent from Q4 of 2008. (The caveat here is that the final quarter of 2008 was brutal for Linux -- as it was for most other platforms.) In the last three months of last year, Linux server sales also outpaced those of Windows, which fell off 1.5 percent, year over year.

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