Business Tech

PC processors are the latest tech segment bouncing back from the recession.

Third-quarter shipments of computer processors, or CPUs, climbed 23 percent over the second quarter of 2009, doubling typical growth and setting a record for sequential growth, according to an IDC report released Monday.

Revenue from processor sales also bounced back to hit $7.4 billion, a 14 percent gain over the second quarter, according to IDC's "Worldwide PC Processor 3Q09 Vendor Shares" report.

IDC viewed the record levels in shipments as a promising sign in economic recovery.

"Most meaningful about 3Q09 is that, since PC processor shipments overall just slightly exceeded shipments in 3Q08--which was itself a record quarter at the time--we know that the processor market is recovering," Shane Rau, IDC's director of semiconductors for personal computing research, said in a statement.

With the popularity of Netbooks, mobile processors such as Intel's Atom chip drove much of the growth. Shipments of the mobile CPUs jumped 35.7 percent over the second quarter, while desktop processor shipments rose 11.4 percent sequentially. Since mobile processors are cheaper than their desktop counterparts, their growth in revenue trailed the growth in shipments.

"The story about 3Q09 leads with Atom processors being sold in mini-notebooks (a.k.a. Netbooks) manufactured and sold in China," said Rau. "While Atom processors led the PC processor market to reach record unit shipments, on the revenue side, their low average selling price led to notable price erosion, more than 7 percent."

Among vendors, Intel kept its place at the top of the charts, enjoying an 81.1 percent share of the worldwide market for processor shipments. That left AMD with 18.7 percent and third-place Via Technologies with 0.2 percent.

By processor type, Intel captured 88 percent of the mobile PC processor market, leaving Advanced Micro Devices with 11.9 percent, and Via with the rest. For desktop CPUs, Intel's slice was smaller at 72.2 percent, while AMD grabbed a 27.4 percent chunk and Via held a 0.3 percent share.

Solid demand so far in the fourth quarter led IDC to raise its expectations for 2009. The firm is now eyeing more than 300 million shipments of processors for the year, a gain of 1.5 percent over 2008.

Still, since much of the growth came from low-cost mobile processors and certain areas of the economy remain sluggish, IDC is cautious about early 2010.

"The market's growth has been due to shipments of inexpensive Atom processors being sold into markets like China, which is being stimulated by government incentives there," Rau said. "The Chinese market can be very opaque--there are lots of places where inventories can hide. We have to be on the lookout for when China decides it can't consume more processors. Meanwhile, the U.S. market is still hamstrung by housing foreclosures and rising job losses."

New data from IDC's Cloud Services Forecast shows that cloud services will outpace traditional IT spending over the next five years and will represent $44.2 billion, or roughly 10 percent, of all IT spending by 2013.

Cloud services revenue

(Credit: IDC)

However, the missing link in this data set is that these numbers account only for IDC's cloud services taxonomy (Application Software, Application Development and Deployment Software, Systems Infrastructure Software, and Server and Disk Storage capacity) and don't represent private clouds.

Private clouds--or at least internal enterprise applications that use the same principles--will undoubtedly become a major trend over the next five years. In addition to the cost savings of using existing compute power, the ease of use of cloud APIs will work their way into the enterprise quickly, now that developers are comfortable with public cloud services like Amazon S3 and EC2.

If public cloud services will be 10 percent of all IT money spent, that represents a blisteringly fast growth rate. And while we certainly don't wish the recession to continue, it's interesting to see how companies have adapted their IT plans to take advantage of services that require far less capital expenditure. From IDC:

The five-year growth outlook remains strong, with a five-year annual growth rate of 26 percent--over six times the rate of traditional IT offerings. In spite of the challenging economy--or more accurately, because of it--this growth rate advantage expanded from last year's forecast, in which cloud services were forecast to grow at over five times traditional offerings.

There is no question that cloud services are in their infancy and that the market is ripe for further disruption. The challenge going forward will be to accurately measure just what applications and services are internal, external, cloud, or otherwise.

In the meantime, let's all just be glad to see IT spending on the rise.

It's still dog days for those in the business of making and selling PCs.

Global PC shipments fell 2.4 percent in the second quarter of the year compared with the same quarter last year, and the value of those shipments dropped 19.1 percent over the same period, according to a report released Wednesday by IDC.

Desktop shipments dropped 17 percent for the quarter as more and more people continue to opt for portables, according to IDC's Worldwide Quarterly PC Tracker report. Consumer laptops and Netbooks accounted for the only bright spot, with overall shipments growing 44 percent over a year ago from a low of 28 percent.

However, the growth in portables came at a cost. Traditional laptops saw shipment growth of 13 percent for the quarter, but the financial value of those shipments declined 6 percent.

Netbooks proved the most popular, with shipments rising almost 25 percent, from 5 percent a year ago. But again, this trend brought down overall value, with Netbooks costing around $400 compared with $900 for traditional laptops.

(Credit: IDC)

IDC sees better times ahead, expecting the market to improve for both unit growth and value. Desktop volume is forecast to be flat in 2010, but portable PCs will grow 16.5 percent, said the report.

The Netbook market will continue to rise. But the trend toward thin, light laptops using CULV (consumer ultra-low voltage) processors will limit the market share of Netbooks, boosting the value of overall PC shipments.

"Although mininotebooks have hurt margins of traditional notebooks, we can expect Ultrathin Notebooks based on new low voltage processors from Intel and AMD to somewhat stem the tide," said Jay Chou, research analyst for IDC's Worldwide Quarterly PC Tracker.

Over the longer haul, shipments of portable PCs should rise 17 percent on average through 2013, delivering 11 percent growth in total PC shipments and close to 5 percent in the value of those shipments.

Server sales around the world dropped to $9.8 billion for the second quarter of the year, a fall of 30.1 percent from the same quarter in 2008, according to an IDC report released Wednesday.

The latest downturn marks the fourth consecutive quarter of lower sales and the weakest quarterly server revenue since IDC first started tracking the market in 1996.

Quarterly server shipments also fell 30.4 percent from 2008's second quarter and 26.5 percent from the first quarter of 2009, according to IDC's Worldwide Quarterly Server Tracker. The global recession is still forcing enterprise customers to hold off on server purchases, IDC said.

All three classes of servers tracked by IDC were hit by weaker sales for the quarter. Revenue for high-end enterprise systems tumbled 32 percent from the second quarter of 2008. Sales of midrange enterprise machines dove 28.1 percent, while volume systems slumped 30 percent. This marks the third consecutive quarter that all three segments showed a sales drop.

"Over the past four quarters, the worldwide server market has experienced significant revenue deceleration in all geographic regions as the economic recession has deepened," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "Fewer servers have been shipped over the past four quarters than at any time since 2005 and it is clear that the worldwide server installed base is aging rapidly."

In terms of market share, IBM again hit the top of IDC's list with a 34.5 percent slice of the market on server sales of $3.4 billion. Hewlett-Packard came in second with a 28.5 percent market share based on revenue of $2.8 billion.

Uncertainty about its future may have led to poor results for Sun Microsystems. The company, which has sealed a deal to be acquired by Oracle, sold only $981 million worth of servers in the quarter, for a 10 percent cut of the market. Sun suffered the highest revenue decline on the list, with a drop of 37.2 percent from the year-ago quarter.

"Non-x86 servers did poorly for the quarter overall, and since Sun's business is largely exposed to that segment it suffered because of it," said IDC research analyst Daniel Harrington. "Without a doubt there were also negative effects on their business due to 'Sun Attack' programs launched by both IBM and HP in an effort to go after those uneasy customers. I think you are starting to see the first signs of that in these numbers."

With an economic recovery in sight, IDC is forecasting a brighter future as customers begin to test the waters with new server purchases.

"In the weeks and months ahead, IDC believes that IT customers around the globe will begin to focus on the future once again," said Eastwood, "making strategic computer platform decisions for the next business cycle, and driving more predictable server demand as market conditions stabilize in the second half of 2009."

Helped by demand for Intel's Atom chip, microprocessor shipments shot up 10.1 percent in the second quarter of the year, according to research released Thursday by market firm IDC.

The second-quarter gain from the first quarter compared with a drop of 10.9 percent from the fourth quarter of 2008 to first quarter of 2009. However, the year-over-year comparison with 2008's second quarter showed a drop of 7 percent.

The growth from the first quarter of 2009 to the second quarter was driven largely by manufacturers replenishing their chip inventory, rather than any boost in consumer demand for PCs, said IDC.

The Atom processor also played a role. Second-quarter 2009 shipments of Atom, which has found a home in Netbook PCs, grew 24 percent over the first quarter. The chip accounted for around 25 percent of Intel's processor shipments and 8.1 percent of the company's mobile processor sales in the quarter, estimated IDC.

Overall, Intel's second-quarter PC processor shipments jumped 12.5 percent over the first quarter, while AMD's inched up 1.8 percent for the same period.

"The percentage of Intel's revenue earned in Asia/Pacific grew from 51% in 1Q09 to 55% in 2Q09," Shane Rau, director of Semiconductors: Personal Computing research at IDC, noted in a statement. "This fact, combined with the significant sequential 'snap-back' rise in Intel's overall processor shipments--particularly Atom shipments--while AMD's overall shipments were about flat, indicate that the PC processor market didn't recover in 2Q09."

Overall market revenue rose 7.9 percent from the first quarter of 2009 to the second, but second-quarter revenue was down 15.3 percent compared with the year-ago quarter.

With the Atom chip and inventory refresh driving second-quarter growth, the processor business is still weak, said IDC. And a definitive recovery is not yet in sight.

"Going forward, IDC believes that (original design manufacturers) and (original equipment manufacturers) have balanced out their inventories and so we can't rely on inventory replenishment to drive market improvements," said Rau. "Instead, we can only rely on what actual end demand really is, and that means we have to be cautious not to be over-exuberant that, say, the traditional back-to-school PC buying season will materialize into a bullish second half. It won't."

The storage software industry has seen its first quarterly sales decline after more than five years of solid growth, according to a report from market researcher IDC.

First-quarter 2009 revenue for the industry sank 5.2 percent to $2.8 billion from the previous year. The slump has impacted several key vendors, including Hewlett-Packard, EMC, and IBM, all of which sell storage software to enterprise clients.

"The combination of the normally slow first quarter for most companies with the continued economic climate was displayed in this quarter's results," Michael Margossian, research analyst for storage software at IDC, said in a statement. "A majority of companies displayed either negative or very low year-over-year growth."

The software storage industry includes areas, or submarkets, such as data protection and recovery, archiving, data replication, and storage device management. Most of those segments were battered by the weak business climate.

"On a yearly basis, a majority of the sub-markets declined from the previous year's first quarter," Laura DuBois, IDC's research director for storage software, said in a statement. "Predominantly affected were the Device Management, Replication, and Infrastructure markets, all segments closely aligned with the storage systems themselves."

Among the top five players, HP was hit the worst with quarterly sales of $97 million, a 21.5 percent drop from $123 million the previous year. EMC watched its revenue fall 14.5 percent to $612 million, from $716 million a year earlier. Only Symantec eked out a small gain, with sales of $531 million, 2.5 percent higher than the year-ago quarter's $518 million.

The sales decline for the major companies has rippled through the entire software storage industry. But IDC expects the market to bounce back once the top five recuperate.

"The overall Storage Software market was pulled down by the underperforming large companies that make up a bulk of the submarkets," said DuBois. "Once they start to recover, they will bring the entire market up with them."

The software report follows IDC's accounting late last week on the first quarter's poor performance in the disk storage business.

The disk storage market is the latest casualty of the recession. Worldwide sales for storage vendors in the first quarter of 2009 dropped 18.2 percent to $5.6 billion from $6.8 billion a year ago, according to a report from research firm IDC.

The market includes vendors such as IBM, Hewlett-Packard, and Dell, which sell complete disk storage systems to enterprise customers. IDC blamed the decline on the overall downturn in total server sales.

Among the top five vendors, HP fared the worst, hit with a 25.8 percent drop in sales to $975 million from $1.3 billion a year ago. IBM saw its disk storage revenues sink 21.7 percent $811 million from $1 billion. Dell was next on the list with sales of $660 million, 17.2 percent lower than $797 million the previous year.

The news wasn't all bad, noted IDC, since total disk capacity used by companies worldwide shot up 14.8 percent to 2,146 petabytes.

"The disk storage system vendors are really seeing the impact of the global economic downturn in the first quarter revenues," Steve Scully, research manager for enterprise storage at IDC, said in a statement. "However, while total revenues declined year over year, the overall storage capacity shipped continued to grow. These contrasting results are due to a combination of currency implications, lower overall sales, shifts in product mix, and aggressive pricing actions."

Despite the sour economy, companies still need disk storage, notes the report, but are opting for systems in the low and middle price tiers.

"Entry-level price bands ($0K - $14.99K) showed 9.9% year-over-year growth and the midrange price band ($15K - $49.99K) was flat year over year," Liz Conner, an IDC research analyst, said in a statement, "supporting IDC's belief that storage products are still in demand, with customer spending trending towards more modular, price point options."

The disk storage market is in the midst of another battle, with vendors EMC and NetApp fighting to acquire Data Domain. A top supplier of deduplication systems, Data Domain has been one of the few companies in its industry doing well despite the global downturn.

The report was put together by IDC's Worldwide Quarterly Disk Storage Systems Tracker, which analyzes the global disk storage market each quarter.

Worldwide server sales suffered a 25 percent drop in the first quarter, hitting their lowest level in at least 12 years, according to a new report from market tracker IDC.

The report, released Thursday, recorded first-quarter factory server sales at $9.9 billion, a drop of exactly 24.5 percent over the same period a year ago--and the lowest level since IDC began covering the market a dozen years ago.

The number of servers shipped fell 26.5 percent from the year-ago quarter, the smallest quarterly figure in the last five years.

IDC breaks the server market into three segments--volume servers (priced under $25,000), midrange ($25,000 to $499,999), and high-end enterprise ($500,000 or more). For the first time since 2002, all three segments saw lower revenue.

The low end of the market suffered the most, with quarterly sales sinking 30.5 percent year over year. Revenue in the midrange market slipped 13.6 percent, while high-end sales fell 19.5 percent.

"Market conditions worsened in all geographic regions during the first quarter as customers of all types pulled back on both new strategic IT projects and ongoing infrastructure refresh initiatives," Matt Eastwood, group vice president of Enterprise Platforms at IDC, said in a statement.

Among the top five server vendors profiled, Dell was hit hardest, with quarterly server revenue tumbling 31.2 percent. Hewlett-Packard showed a 26.2 percent decline. Sun Microsystems watched its revenue dive 25.5 percent. IBM saw its sales drop 19.9 percent. Sales at Fujitsu/Fujitsu-Siemens fell 18.8 percent.

IBM and HP are the top server vendors, with each owning 29.3 percent of the server market.

On an optimistic note, Eastwood did predict a slight turnaround later this year.

"Most enterprise organizations are deferring new IT procurements and instead focusing on extending server lifecycles and improving existing asset utilization," he said. "IDC believes that while these strategies are effective in the near term, server demand will begin to improve in the second half of the year as customers begin to rebuild their IT capabilities in advance of a meaningful economic recovery in 2010."

(Credit: IDC)

Open source has become big business, suggests an article in the Investors Business Daily, but it has done so by becoming more like the proprietary-software world it purports to leave behind.

The article cites recent research from IDC indicating that CIOs allocated up to 24 percent of their budgets to open-source software in 2008, up from 10 percent in 2007--a finding that jibes with recent data from Forrester. This open-source growth is propelling Red Hat to grow "at two to three times the rate of the broader software industry over a multiyear horizon," according to research from Piper Jaffray.

Red Hat is an example of "free done right," following analysis from TechDirt. We've moved beyond the business models that insist that every line of software be open source: they couldn't scale and tended to treat openness as an end in and of itself, rather than as a means to an end.

Today, if you look at the most successful open-source businesses, none of them pass the ideologues' unrealistic and counterproductive "100-percent freedom" litmus test. Not a single one of them.

And that's OK. Google does a tremendous amount of good in the open-source world, yet took a beating last week for not being open source "enough" on the Open Source Initiative's osi-discuss mailing list. Google's open-source program manager, Chris DiBona, responded:

Yes, I can see how people would think that Android and Chrome aren't 'real' open source. *rolls eyes* Damn foolish assertion, if you ask me.

DiBona is right to refuse to be goaded into a walk down an inaccurate and ill-conceived open-source memory lane. That "give-away-the-software-and-sell-support" model was always doomed to scale poorly and consign its adherents to minimal relevance to the wider software market.

Fortunately, the software industry has been embracing a broader definition for "open-source business" that includes many different ways to contribute to and profit from this interesting development and distribution model.

Those who persist in trying to shove the genie back into a crippled container are doomed to fail.

Follow me on Twitter @mjasay.