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IDC: Storage spending fell off a cliff in first quarter

This had been apparent from the earnings reports of the major storage vendors, but it’s still startling to see the numbers all lined up at once: analyst firm IDC released its worldwide quarterly disk tracker for the first quarter of 2009 today, and the numbers are not pretty.

Worldwide external disk storage systems factory revenues fell 13.6%. The total disk storage systems market declined to $5.6 billion in revenues, an 18.2% decline. Networked storage (NAS plus SAN) fell 12.5%. SAN declined 14.3%. Every one of the top five vendors posted a revenue decline, all but two of them (Dell and Hitachi) in the double digits.

Even in the fourth quarter of 2008 when the the economic crisis was already in full swing, year-over-year revenue only declined 0.5%.

But we knew the first quarter had been awful – maybe it’s even more interesting to see what didn’t decline. For one thing, while revenues plummeted, capacity growth remained positive, up 14.8% compared with last year. “These contrasting results are due to a combination of currency implications, lower overall sales, shifts in product mix, and aggressive pricing actions,” according to Steve Scully, research manager, enterprise storage, as quoted in an IDC press release.

Entry-level price bands (under $14,999) grew 9% and the midrange price band ($15,000 – $49,999) was flat. That might explain all the entry-level NAS systems we’ve seen introduced over the last few months. The very high end ($300,000 and up) saw growth, also the result of discounting, according to IDC.

In what may be the most interesting data point of all, iSCSI SAN showed 40.5% revenue growth compared to the prior year’s quarter. Dell led the market with 36.4% revenue share, followed by EMC with 15.8%. I don’t think small companies have some advantage in this crisis big companies don’t. Companies of all sizes are probably buying low-end products to bridge the gap.

IDC research manager Natalya Yezhkova agreed. “We don’t do analysis by company size,” she said. “But one of the products that’s done really well on the low end is JBOD, which goes into expanding the capacity of servers, specifically blade servers, and that’s usually at larger companies. Users are trying to expand at low cost what they already have.”

Storage vendors like EMC have predicted stabilization in the middle quarters of the year, with at least signs of recovery toward the fourth quarter. Yezhkova said that in IDC’s next quarterly disk forecast “the magnitude and rate of recovery may have changed, but the overall sense that we’ll see recovery by the end of teh year is still the assumption.”