Storage Spending Slumps 18% In First Quarter

A combination of a worldwide recession, cutbacks in IT spending and falling prices produced an 18.2 percent decline in spending on disk storage system in the first quarter compared to a year ago, with overall revenue coming in at $5.6 billion, research firm IDC reported. Worldwide factory revenue for external disk storage systems fell 13.6 percent to $4.2 billion.

Still, the hunger for more storage capacity didn't shrink. IDC said vendors shipped 2,146 petabytes in disk capacity in the quarter, an increase of 14.8% over the previous year.

IDC research manager for enterprise storage Steve Scully attributed slump in revenue on the global economic downturn but noted the increase in shipped capacity. "These contrasting results are due to a combination of currency implications, lower overall sales, shifts in product mix, and aggressive pricing actions," he said in a statement.

All of the major storage vendors posted declines in revenue, double-digit declines in most cases, while Dell, Hitachi, EMC and NetApp saw modest gains in market share, according to the IDC Worldwide Quarterly Disk Storage Systems Tracker report.

Not all the news was bad, said Liz Conner, a storage systems research analyst at IDC. She said systems priced under $15,000 showed a 9.9 percent increase year over year, while systems priced between $300,000 and $500,000 generated year over year growth of 14.5 percent. That growth at the high end resulted from vendors discounting their top-of-the-line systems to "meet the demand for high-end storage while accounting for reduced IT budgets," she said in a statement. There was no growth in midrange systems that costs between $15,000 and $50,000, IDC said.

EMC remained on top of the external disk storage market, but its market share in the first quarter declined from 21.3 percent a year ago to 20.7 percent and revenue shrank 16 percent from $1.037 billion to $871 million. Hewlett-Packard was second with a market share of 11.5 percent in the first quarter of 2009, down from 12.3 percent a year ago, and revenue of $482 million, down 19.6 percent from $600 million a year ago. IBM followed with a market share of 11.3 percent, down from 11.5 percent, with revenue of $476 million, down 15 percent from $560 million a year ago.

Both Dell and Hitachi boosted their share of the market, but experienced decline in revenue like all of their competitors. However, they only posted single digit declines while the rivals had double digit declines. Dell had a 9.8 percent share of the market in the first quarter, up from 9.2 percent a year ago, but revenue fell 8.8 percent to $410 million from $450 million. Hitachi had a 9.4 percent share of the market, up from 8.9 percent, and revenue of $394 million, down 9.1 percent from $433 million a year ago. NetApp's market share stayed the same at 8.9 percent while revenue declined 13.5 percent from $432 million to $373 million. All other vendors combined increased their market share from 27.8 percent to 28.5 percent.

Overall factory revenue for total disk storage systems saw HP on top with a market share of 17.4 percent, down from 19.1 percent a year ago, and revenue of $975 million, down 25.8 percent from $1.314 billion a year ago. EMC increased its market share to 15.5 percent from 15.1 percent a year ago, but revenue fell 16 percent from $1.037 billion to $871 for the quarter. IBM's share of the market was 14.4 percent for the quarter, down from 15.1 percent a year ago, and it had revenue of $811 million, down 21.7 percent from $1.036 billion.

Three companies -- Dell, Hitachi and NetApp -- managed to increase their share of the market, with Hitachi showing the biggest gains. Dell went from 11.6 percent to 11.7 percent, Hitachi grew from 6.5 percent to 7.3 percent, and NetApp climbed from 6.3 percent to 6.6 percent. Hitachi was the only company in the category to experience a single digit drop in revenue.

One market segment -- iSCSI SANs -- showed strong growth with a 40.5 percent jump in revenue. Dell was on top with a 36.4 percent of revenue and EMC was second with a 15.8 percent share of revenue.

"Price sensitivity was a big factor in the healthy growth of iSCSI SAN, the only installation environment segment that ended the quarter in positive territory," Natalya Yezhkova, a research manager for storage systems at IDC, said in a statement. "While still a relatively small segment of the market, iSCSI SAN is the bright spot for end users and for vendors, as it helps end users to deploy network storage, often with enterprise-class functionality, at a lower price point than traditional FC SAN, and, thus, creates more selling opportunities for vendors."

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