Jon Peddie Research - a technically oriented marketing, research, and management consulting firm in the graphics industry.

The workstation market slows to a more sustainable pace in Q1’11

Posted by Webmaster on May 27th 2011 | Discuss
Tags: nvidia amd market ati graphics workstation hp

Fortunately and as expected, the workstation market has slowed down. After a robust rebound beginning in the second half of 2009 and continuing through 2010, the market has found a more modest and sustainable pace. While reduced growth might leave some disappointed, we see it as a healthy sign the market is stabilizing and averting a second dip, one that the related market for professional graphics hardware couldn’t avoid.

Q1’11 is now in the books, with the quarter seeing 860.0 thousand workstations shipped worldwide, representing a 4.8% sequential decline and an 18.6% year-over-year gain. Both of those figures need to be weighed in context, however, to better understand the actual condition of the market. The year-over-year growth number has to be taken with a grain of salt, as a year ago the market had not yet fully recovered from the dramatic downturn of late 2008 and early 2009.

An exuberant year-over-year number for last quarter doesn’t translate into an exuberant outlook for the market. And the first quarter in stable economic conditions typically sees a modest sequential fall-off from Q4, on the order of what we saw. So despite the fact that one number was substantially up and the other down, read in context the fourth quarter results would indicate a flattening marketplace.

HP firmly takes hold of number one spot in market, as Dell lags further

Over the second half of the last decade, HP had made steady gains in its chase of market leader Dell. And in Q3'10, HP ahead to put an appreciable gap over Dell, a gap it extended even further in the fourth quarter. JPR was expecting a more dramatic separation of the two, an assumption that the results from the first quarter of 2011 validate. At 42.9% of units, HP is now the undisputed king of the workstation market, clearly distancing itself from Dell at 34.8%.

Professional graphics market sees cautious resumption of growth

For the closely related market for professional graphics hardware, the first quarter saw Nvidia (with its Quadro brand) and AMD (FirePro) combining to ship around 1.19 million units, up 5.8% sequentially. The market bounced had back very strongly in the first half of 2010 from the recession, mounting a pace we had thought was a little too hot in the context of the broader workstation and tech markets. As such, the firm saw the chance for a second dip in the market, one that eventually did manifest itself, occurring not only in Q3'10 but extending into Q4'10 as well.

We attribute the softer shipments in both quarters to an overly optimistic sell-in in the record-setting quarters prior, rather than due to any long-term malaise. The fourth quarter flatness was more about continuing digestion at the OEM level, and we didn't expect the dip to be severe nor protracted. Fortunately, Q1'11 has delivered a solid sign that the preceding slide was nothing particularly consequential.