Storage Sales Up, Says Gartner

Worldwide external disk storage revenue grew 11 percent to $3.54 billion in the first quarter of 2005 after a sluggish finish to 2004, according to market research firm Gartner Inc. (see Gartner: Dell, NetApp Lead Storage Surge).

Gartner analyst Roger Cox says the first-quarter, year-over-year increase was in sharp contrast to the fourth quarter of 2004, when revenue crept up 1.2 percent from the previous year. He attributed the surge to continued rapid growth of Dell Inc. (Nasdaq: DELL) and Network Appliance Inc. (Nasdaq: NTAP), a rally by IBM Corp. (NYSE: IBM) around its new systems, and a mini-rally by Hewlett-Packard Co. (NYSE: HPQ).

While the top six storage vendors grew revenue over the same period of last year, only Dell, NetApp, and IBM gained market share. Dells revenue jumped 35.8 percent – more than three times the industry total – as its market share ticked up from 5.4 percent to 6.6 percent. Dell resells midrange storage from EMC Corp. (NYSE: EMC), which remained in the No. 1 spot while barely keeping pace with overall industry growth at 11.2 percent.

“Dell’s blowing everybody’s socks off,” Cox says. “It shows you the power of their go-to-market story. They’re investing in pre- and post-sales support, and that’s paying off for them.”

NetApp, which primarily sells NAS but has made gains in SAN revenue in recent quarters, grew its revenue 27.2 percent and increased market share from 5.2 percent to 6 percent. Cox says NetApp’s recent success is due to its offering file and block-level storage in the same system.IBM, which upgraded its midrange and enterprise SAN systems late last year, increased revenue by 13.6 percent and grew market share from 11.6 percent to 11.9 percent. Cox says IBM bounced back from an unusually poor fourth quarter, caused largely by a delay in shipments of its new DS6000 midrange and DS8000 enterprise systems (see IBM Denies Slipped Ship Date).

While Dell, NetApp, and IBM made strides, EMC, Hewlett-Packard Co. (NYSE: HPQ), and Hitachi Data Systems (HDS) had mixed results. And Sun Microsystems Inc. (Nasdaq: SUNW) was the clear loser.

EMC increased revenue from $732.9 million to $814.7 million, but its share slipped from 23.2 percent to 23.0 percent. HP increased year-over-year revenue for the first time in more than a year and it remained in second place behind EMC, but its share still slipped from 16.6 percent to 15.9 percent. HP grew 17 percent in the low end and midrange, while the high-end XP series its sells through an OEM deal with Hitachi declined.

“I was surprised that their [midrange] EVA system gained because they were in a middle of a transition,” Cox says, referring to HP’s recent upgrade of its midrange SAN platform (see HP Plans EVA Facelift and Users Eye Up HP's EVA).

Hitachi’s share dropped from 10.6 percent to 10.4 percent in the quarter. Cox says the first quarter is usually strong for Hitachi, but he says it needs to strengthen its presence in the fast-growing midrange sector. Hitachi, traditionally an enterprise play, is expected to launch a new midrange system based on its high-end TagmaStore platform this summer.Sun took a steep drop. Its revenue fell 17.9 percent from the previous year, and its market share slipped from 6.7 percent to 5.0 percent despite making a strong marketing push around its new midrange StoreEdge 6920 system (see Sun Sings New Storage Song). “The only weak guy last quarter was Sun,” Cox says. “They continue to struggle.”

Table 1: Worldwide External Disk Storage Revenue for 1Q05 (Millions of U.S. Dollars)

— Dave Raffo, Senior Editor, Byte and Switch