External Storage System Sales: IBM, Huawei Grow; Dell, HPE, NetApp Plummet

IDC reports that robust mainframe sales during the second quarter gave IBM a big storage boost, while the recovery of China from the worst of the pandemic pushed Huawei sales up nearly 50 percent. Dell, HPE and NetApp, meanwhile, saw double-digit declines.

Storage Sales Head To The Cloud

IDC Tuesday reported that total enterprise OEM storage systems revenue for the second calendar quarter of 2020 fell 5.0 percent over last year to just under $6.3 billion. This was despite an increase in external OEM storage capacity shipments of 5.1 percent over last year to 17.1 exabytes.

Contrast this with the sales of ODM (original design manufacturer) storage systems to hyperscale data center providers, which IDC said grew 64.1 percent over last year to reach $47.0 billion, while shipments to that part of the market grew 122 percent to 74.8 exabytes, said Sebastian Lagana, research manager at IDC.

“The volume of storage and servers delivered to the cloud was ridiculous,” Lagana told CRN. ”The majority of ODM storage is going to the cloud.”

While a 5.0 percent drop in worldwide enterprise external OEM storage systems revenue is significant, things could have been worse. IDC three months ago estimated first calendar quarter 2020 external storage systems revenue dropped 8.2 percent. And it‘s a drop that has been happening for some time. Sales for the second quarter of 2019 fell 0.8 percent compared with 2018, IDC said.

Here’s a look at the health of the branded enterprise storage industry and what‘s behind the numbers.

Flash Storage Still The Bright Spot

According to IDC, the all-flash storage array part of the business saw revenue jump 7.7 percent over last year to reach $2.5 billion, which meant that all-flash storage array sales accounted for about 40 percent of total worldwide enterprise external storage systems sales.

Sales of hybrid flash arrays, which combine both flash and spinning disk media, also totaled $2.5 billion, which was down 8.7 percent from last year.

Combine the two, and that left only 20 percent of the worldwide enterprise external storage systems market to traditional spinning disk-only systems.

5. Huawei

China-based Huawei was the real bright spot in the second quarter‘s enterprise external OEM storage system sales with solid 47.6 percent year-over-year growth in revenue to $481.5 million. That is an impressive number given that because of U.S. government concerns, Huawei sells little if any enterprise storage systems in the crucial U.S. market.

However, IDC’s Lagana said, that growth was due primarily to Huawei‘s home market of China, which is the only market, along with much smaller Canada, that grew during the quarter. Lagana said IDC estimates that China’s enterprise storage systems market grew a healthy 18 percent.

The key to understanding how that happened is to remember that the COVID-19 pandemic started in China during the first calendar quarter of 2020, Lagana said.

“Consumers there locked down purchases,” he said. ”And then the supply chain was locked down. So there was a lot of pull-through in the second quarter of sales from the previous quarter. And on the supply side, factories in the second quarter were running as much as they could.”

4. IBM

IBM‘s enterprise external OEM storage system revenue of $504.6 million gave the company the No. 4 spot, according to IDC. That represented a growth rate of 12.6 percent year over year, second only to that of Huawei for the quarter.

While IBM did not break out actual storage revenue numbers during its second fiscal quarter 2020 financial report on July 20, the company did report storage systems hardware revenue was up 3 percent during the quarter over last year.

IBM‘s storage business has been focused on building software and services based on its Spectrum line of software-defined storage technologies. However, the company early this year replaced its incompatible legacy Storwize and A9000 storage families with a new FlashSystem all-flash array family.

IDC‘s Lagana said IBM storage hardware sales suffered from a slow rollout of all-flash storage, but that is changing. He also said that strength in IBM storage in the second calendar quarter was tied at least in part to 68 percent growth in IBM Z mainframe sales, which pulled along IBM storage sales. “The downside is that System Z sales are on a five- to six-quarter cycle,” he said. ”Then the sales go away.”

3. NetApp

NetApp, which in the first quarter of 2020 was No. 2 in enterprise external OEM storage system sales, fell to third place this quarter with revenue of $612.6 million, down 10.4 percent over the $684.0 million IDC estimated for the previous year. However, given NetApp‘s 10.4 percent revenue drop in the second quarter versus the 15.0 percent drop HPE experienced during the quarter, NetApp could be in line for reclaiming the No. 2 position.

NetApp, the only storage-only vendor in the list of top five enterprise external OEM storage system vendors, in late August reported first fiscal quarter 2021 revenue of $1.3 billion, which was up 5 percent year over year. That growth was a pleasant surprise for NetApp investors, who have been seeing the company‘s sales fall for several quarters.

NetApp also reported revenue for its all-flash array business increased 34 percent on an annual net revenue basis, and annual recurring revenue grew 192 percent.

For NetApp, the future is less about storage hardware and more about software and services related to bringing data to cloud infrastructures where it is developing technology to manage it and combine it with compute and other services in a more seamless fashion.

2. Hewlett Packard Enterprise

HPE‘s second-quarter 2020 external storage systems sales took the biggest hit of the top five vendors. IDC estimated revenue to be $659.7 million, down 15.0 percent from last year’s $776.0 million.

HPE in late August reported total third fiscal quarter 2020 storage sales of $1.1 billion, which the company said was down 10 percent compared with the same period last year. Among the storage highlights of the quarter were 114 percent growth in sales of the HPE Primera next-generation intelligent storage platform, the signing of 104 new Primera customers, 112 percent growth in Nimble distributed hyperconverged infrastructure technology revenue, and 31 percent growth in big data storage solution sales, HPE said.

1. Dell Technologies

Dell Technologies maintained its No. 1 position by a very comfortable margin with enterprise external storage systems revenue in the second quarter of $1.7 billion. That gave it a market share of 27.0 percent, which was just under the total market share of its next three competitors combined. However, that revenue was down 10.7 percent compared with the same quarter last year, IDC said.

Dell in late August reported second fiscal quarter 2021 storage revenue of $4.01 billion, which was down 4 percent compared with last year‘s $4.18 billion. That figure accounts for all of Dell’s storage sales, and not just those of its external storage systems.

Dell‘s midrange and its SMB storage sales were down significantly during the second calendar quarter, but its high-end storage sales grew, Lagana said. “So it’s not all bad news,” he said.

Dell is banking on its new PowerStore midrange line, which replaces multiple incompatible legacy storage lines, for growth in its midrange storage business.