IDC: Storage prices drop, midrange sales up in 2004

IDC: Storage prices drop, midrange sales up in 2004

A burgeoning midrange storage market and the plummeting cost of disk drive technology drove an increase in the sales of external disk storage systems in 2004, according to an IDC report.

External storage system sales grew only 1 percent in the fourth quarter of 2004 but rose 4.7 percent for the entire year, accounting for US$14.2 billion in sales, according to IDC's Worldwide Quarterly Disk Storage report, released last week.

The dollar-per-gigabyte price of external disk storage was down 36 percent year over year, according to Brad Nisbet, a storage analyst at IDC. In 2003, per-gigabyte external storage prices fell 33 percent, while in 2002 and 2001, they were down 40 percent and 43 percent, respectively.

The 2002 and 2001 price drops were affected more by a decline in overall IT spending, as cheaper Advanced Technology Attached disk drives and higher-capacity drives had yet to hit the market. "In 2004, we're beginning to encroach on similar pricing declines, but we also have revenue growth," Nisbet said. "But that's really a function of midrange products that have a lower dollar-per-gigabyte price."

Also notable in the report was that EMC regained its lead over Hewlett-Packard in sales of external disk storage systems. EMC had a 22 percent market share, followed by HP and IBM with 19.4 percent and 13.1 percent, respectively. EMC and Dell posted the strongest year-over-year revenue growth during the fourth quarter of 2004, with 15.2 percent and 13.4 percent growth, respectively.

"EMC, Dell and Network Appliance were really strong, and the rest were not," Nisbet said. "It was encouraging to see continued acceleration in the annual growth rate" for the number of petabytes sold in external disk storage systems, which grew 63 percent in 2004.

He said EMC has been firing on all cylinders with new product marketing strategies and execution on sales through partnerships with companies such as Dell -- particularly in the midrange market. HP has not, Nisbet said.

EMC reported last month during its year-end earnings call that its fastest growing midrange line of products -- which includes its Clariion, Celerra and Centera hardware -- saw 46 percent growth last year.

The network-attached storage market also grew in 2004 and was up 14.7 percent year over year. Network Appliance led the vendors with 36.9 percent market share, followed by EMC with 32.8 percent share.

IP-based storage-area networks also saw tremendous growth, IDC said. The iSCSI SAN market posted revenue growth of nearly 32 percent in the fourth quarter of 2004 compared with the previous quarter. Network Appliance led that market with 38.9 percent share, followed by EMC with 25.6 percent. The overall network storage market, which includes both NAS, SAN and iSCSI SAN, showed an 11.6 percent year-over-year growth rate in the fourth quarter, with more than $2.4 billion in sales, the highest quarterly revenue network storage market recorded to date.

"In 2004, the market for iSCSI SANs grew beyond the $100 million barrier, led mostly by the adoption of midrange systems priced between $15,000 and $149,999," said Natalya Yezhkova, senior research analyst, storage systems, at IDC.

Yezhkova said the SAN and NAS markets also experienced a shift of revenue from high-end to lower-priced products, driven by a continuing drop in prices on disk storage systems and more-competitive product offerings. During 2004, all the major vendors added new entry-level and midrange products to their portfolios.

At the high-end, EMC's Symmetrix gained market share during the year, repelling challenges from IBM and Hitachi Data Systems, which both introduced new models of their high-end systems last year. In fact, IBM acknowledged during its earnings call last week that its high-end Shark array revenue declined 18 percent in 2004. EMC Symmetrix revenue, in contrast, grew 7 percent during the same period.

In 2004, the total disk storage systems market grew 3.2 percent to $20.9 billion. HP continued to claim the top spot for overall storage sales, which includes disk drives in the high-end servers. HP had 23.6 percent overall market share, followed by IBM and EMC with 20.6 percent and 14.3 percent, respectively.

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