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Hard-drive shortage hits servers in Q4, Gartner says

Added on Feb 29, 2012 by Agam Shah

The growth in worldwide server shipments was slower than expected during the fourth quarter due to a shortage in the supply of hard drives, and the trend will continue into the first quarter this year, Gartner said in a study released on Thursday.

Worldwide server shipments totaled 2.5 million units during the fourth quarter last year, increasing by 4.5 percent compared to the same quarter in 2010. However, server makers could not meet demand due to hard-drive shortages. Shipments fell short of demand by around 200,000 units during the fourth quarter, said Jeffrey Hewitt, research vice president at Gartner.

Hard drives have been in short supply due to last year's floods in Thailand. The negative impact of the shortages will continue through the first quarter this year, after which server shipments are expected to grow for the rest of the year, Hewitt said.

Beyond the first quarter, server shipments are expected to grow as companies upgrade servers and build out hyperscale environments, Hewitt said. More processing power is needed in large-scale data centers with the fast growth in Web content and cloud services.

Server shipments will also receive a boost with new x86 server processors from Intel and Advanced Micro Devices, which could strengthen the server refresh cycle, Hewitt said. Intel is expected to announce new Xeon E5 server chips in March, which is the first major chip refresh for standard x86 blade, rack and tower servers since March 2010. Hewlett-Packard and Dell have already announced new servers with E5 chips.

Despite shipment growth, server revenue during the fourth quarter last year decreased year-over-year by 5.4 percent to $14 billion. IBM was the top server maker by revenue, followed by Hewlett-Packard.

But of the top three server vendors, Dell was the only company that experienced an increase in shipment and revenue growth. In terms of shipments, Dell was the second-largest server maker behind Hewlett-Packard, with shipments totaling 573,125 in the fourth quarter, growing year-over-year by 11.2 percent.

Dell was sharp on execution, taking advantage of strong build-to-order capabilities to deliver servers quickly and reduce customer wait times, Hewitt said. Dell also benefited from server growth in the emerging markets.

"It was about the smoothness of the fulfilment engine." Hewitt said.

Server shipments from Hewlett-Packard stumbled by 8.1 percent year over year to 704,853 units during the fourth quarter. Hewitt said HP was partly hurt by channel and delivery issues with x86 servers, and poor sales of high-end servers with Intel's Itanium chip. Oracle's decision to suspend software development for the Itanium processor also hurt HP, Hewitt said.

But HP's server business will recover over the year after the new servers ship, Hewitt said. There are also a lot of expectations from HP as CEO Meg Whitman sets the company's future strategy.

"We're waiting to see what the next moves are going to be under the new leadership," Hewitt said.

IBM was the third largest server vendor on shipments, which fell by 0.9 percent. IBM's high-end systems based on the Power processors did well, buoyed by a strong cyclical demand for mainframes. Hewitt couldn't make a projection on how Power-based mainframes will perform for the rest of the year.

But x86 servers are slowly replacing servers based on Itanium and RISC (reduced instruction set computer) chips, Hewitt said. Revenue of Unix servers fell from $2.9 billion to $2.7 billion during the fourth quarter, Hewitt said.

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