Disk system revenue has at last pulled out of the dive it entered in 2001, and this year will be about flat with last year, according to IDC.
Flat is clearly no high spot, but it is a major improvement on the shrinkages of 19% last year and 21% in 2001 that are IDC’s latest estimates for global manufacturers’ revenue for disk in both servers and external arrays.
The market is bottoming out. Over the past few quarters revenue has shown mostly flat growth, said Charlotte Rancourt, analyst at IDC. In the third quarter, revenue was $4.8bn, down just 0.3% year-on-year, IDC said.
Among the vendors, IDC said that to some degree server makers still enjoy a captive market, and that Dell’s ranking rose in the third quarter because of the success of the co-branded EMC hardware it is selling (see separate story).
Storage makers have avoided full-on price wars by boosting sales of software and services to protect their margins, and have also increased the efficiency of their manufacturing, while customers have exhausted the benefits of their recent waves of SAN building and storage consolidation. Those processes freed up previously wasted storage capacity, but because volumes of data are still soaring, customers have had to return to the well.
People economized in their storage buying, but at the end of the day you still have to put gas in the car, Rancourt said.
A third factor is the fast growing use of disk to store data which until now has been held on tape, a phenomenon driven not only by the emergence of low-cost ATA disk in corporate disk arrays, but by the emergence of data retention regulations. Tape is less able than disk to provide the rapid access and searching of archives, which is a requirement of many regulations.
The levelling out in revenue has come even though IDC said that in the last quarter demand continued to be relatively soft and well below historical levels. But that softening still left total capacity increasing 36% year-on-year to 197 petabytes in the third quarter.
The contrast between flat revenue and ballooning capacity is because of the fast falling price of disk in terms of dollars per megabyte capacity. The dive here is also becoming shallower, and according to IDC has remained below 30% year-over-year for the last two quarters.
Rancourt said: The disk drive market has been abysmal, but now it has stabilized. That stabilization even saw drive-maker Maxtor Corp attempt to raise its prices this year, although its rivals ignored the lead and forced Maxtor to abandon the attempt, Rancourt said.
IDC was shy of making any forecasts for revenue or capacity in 2004, but cited factors that will help shore up revenue. A huge reason for the falling price of capacity has been rapid increases in the capacity of individual disks, but disk makers cannot keep up their recent pace, IDC said. Rather than doubling capacity every twelve months as they have been doing, they are expecting longer cycles of eighteen to twenty four months according to Rancourt. Also, disks are already larger than customers want for some applications, because large disks cannot access data as fast as smaller disks.
This article is based on material originally produced by ComputerWire.