If you caught my previous posting Who Is Really Acquiring Sun?, you will have concluded either that I’m missing some detail of the situation or that IBM is going to walk away with the high-end Unix market, while both Oracle/Sun and HP fight a profitless rearguard action. The IBM Power chip has treated its competitors the way that Jet Li treats his assailants in a martial arts movie, when they believe, quite incorrectly, that they have him cornered. There are bruises and broken bones, and only Jet Li walks away from the incident unscathed.

I-and-I

As far as I can tell, the high-end Unix market contest is over. SPARC will never recover and Itanium can only be classified as the walking wounded. It is never going to compete with Power. Consequently, another equally interesting battle is about to commence, which can be thought of as the contest of I-and-I: IBM and Intel. The outcome of this one is much less certain and there isn’t necessarily going to be a winner because, as in the game of chess, the rules of engagement admit the possibility of a draw.

Let’s paint the picture so that you can see what’s happening out there…

The Battle in Device land

Intel is the 500 pound gorilla in the chip market, but it is not in a completely comfortable position. You can divide Intel’s market between client devices and server devices. Once upon a time client computers (PCs) and server computers (servers with Intel chips) were almost identical. If you wanted a server, then you just bought a PC with a cheap monitor and that was your server. It was excellent value too. Cheap, cheap, cheap.

There was sufficient similarity between PCs and servers for Wintel (Intel and Microsoft) to capture a big percentage of the server market, simply by the force of numbers. From an engineering perspective, it was never a good idea for client and server to be the same kind of unit, but the numbers swamped that engineering nicety – and the commodity Intel server was born (running either Windows or Linux, according to taste.) Engineering sanity was simply swamped by the tsunami of cheapness.

That age has passed. With the monotonous persistence of Moore’s Law, the PC gradually became an engineering joke. It may have had a hugely powerful processor, but the processor rarely did anything – unless you ran some kind of truly heavy graphical workload. The PC chip was a jumbo jet engine strapped to the back of a bicycle.

The PC workloads that could be improved by processor power were, almost exclusively, the graphical workloads. So now, what really matters on client devices is graphical processing – the graphics card and the GPU. This reality has pushed NVIDIA into competition with Intel on the desktop. To add to that, AMD’s purchase of ATI (providing it with a little skin in this game too) has kept it relevant despite, it’s decline in the face of an Intel onslaught. There is more to be said about this, but I’ll save it for another article.

Mobile devices, many of them powered by ARM chips, are rising up, and just to complicate matters, IBM dominates the computer gaming market, providing the chips for Nintendo, Sony and Microsoft – although not identical chips. Intel still rules “the client” but, even though it finally managed to draw Apple into its orbit, it cannot claim dominance. Against the gain of Apple (which previously used a version of IBM’s power chip) it lost the games console market and it has a very weak position in the mobile phone market.

The point in mentioning the competition in this key market is to note the fact that Intel is in no position to employ the joyous tactic of “dumping” in the server market – i.e. using guaranteed profits in the client market in order to dump product in the server market at below cost, to destroy the competition.

Until recently HaveMacWillBlog made sense as a web site into which I could pour just about anything I chose to write about. In April of this year I wrote the posting 10 Words You Don’t Know. I didn’t particularly think it would generate traffic, but it did. It generated traffic in a big way.

What is Big?

Neophite bloggers don’t really know what constitutes good traffic. Well good traffic varies. If you write for CNET or The Register, then a well written piece will pull in thousands of readers, but that’s the power of a high Google ranking.With a lowly blog, unless someone links to you from a popular site, most blog postings – even those that merit attention, will rarely get more than a few hundred reads – and it will even take a long time to rack that number up.

However a good posting, with an attractive title, like Sex and the Naked Vampire will pull in thousands, because that’s how the world works. (That particular posting is up around the 7000 mark).

When I began blogging properly in 2007, rather than posting things here and there, I averaged about a hundred to two hundred readers per day. The numbers began to rise in time as more sites linked to me. Here’s a graph of the traffic:

Most of the rise in traffic since April can be attributed to the Words You Dont Know postings. There have been traffic storms with, on the odd day or two, thousands of visitors.  It began with a link from Stumble Upon, and continued with a MetaFilter link, and a link from a Belgian site, and from various blogs – all of which generated unusually high traffic. Those postings now account for half the traffic on this blog.

Anyway, the Have Mac Will Blog web site doesn’t make much sense any more because it has two distinct traffic lanes; the wordies and the techies, and there’s not a great deal of overlap. It’s become too much of a grab bag. So it has undergone mitosis. It has split like an amoeba into two distinct sites, one of which is now called: Words You Don’t Know.

An Amusing Departure

It’s been a slow day, but at least there’s been a reason to smile, courtesy of Mark Cathcart, Director of Systems Engineering and a Distinguished Engineer at Dell, also; distinguished Tweeter and Blogger.

I received a tweet from him just 20 minutes or so ago and it read:

@robinbloor have mac will blog, have blog that doesn’t handle comments well… see prob report http://snurl.com/qlbt2

I’m busy, but I read the problem report, and it appears that my blog misbehaves when people try to post a comment (at least some of the time). Actually it crashes sometimes when the traffic is heavy and this may be related. It seems to crash at least twice a day at the moment, but courageously revives itself after a minute or two. (Traffic has been heavy because of the Words You Dont Know postings). But the commenting capability probably does need some attention. Monsieur Cathcart is also complaining about how it handles ping-backs.

Anyway, allow me to quote:

“One of the most eloquent [surely you mean elegant? ed] parts of blogging is the simple use of pings and trackbacks. It allows blogs to do what the web does best, link related conversations and information.

After writing my most recent blog entry, I noticed something that hadn’t occured to me at all before. Very few IT Industry analysts blogs provide this facility. Variously they require you to fill in forms, answer captchas, register and worse. In deference to Roblin Bloor, he has already posted my comment on his blog. But why might do IT Industry analysts make it so hard, surely not because they want to control the conversation?”

In the world of servers, the commodity Intel server is currently dominant, but not by as much as you might think. It accounts for around 50% of all revenue spent on servers. Despite predictions that the Unix server market would enter terminal decline, being overwhelmed by loosely coupled commodity Intel servers, Unix is still going strong. Unix servers, primarily running Solaris, HP-UX and AIX, still account for about 35% of all server revenues. In fact, in growth markets (China, India, Russia, Brazil, Korea, etc.) Unix has a larger share; 38% of the market compared to around 30% in North America and most of Europe.

A Tale of Three Chips

Now take a look at the graph below. It’s from IDC (with annotation by IBM) and it shows the market share movement of the big three Unix players from 1999 up to now. You could title it, the inexorable rise of IBM’s P Series. In the period from late 2000 to Q2 2009, IBM has more than doubled its market share to a level previously unequalled by any vendor. IBM is walking away with the market, while both Sun and HP shed market share in roughly equal measure.

Although it would be an oversimplification, you can look at this as the tale of 3 chips, Sun’s SPARC chip, the Intel/HP Itanium and IBM’s Power chip. Take a look at the recent record of benchmarks carried out by these vendors and the Power chip is so far ahead it’s embarrassing. Someone should stop the fight.

After the dot com collapse stripped Sun of a good deal of its revenues, it was always going to have a hard time funding the continued evolution of SPARC. In contrast, HP has no-one to blame but itself. Itanium looks very much like a failure of engineering. You either have to conclude that HP made the wrong technology bet or that IBM’s engineering team has performed out of its skin. Either way, as the graph so clearly indicates, HP has only just been able to keep pace with Sun and IBM has been picking the pockets of both vendors.

If you look at this graph, the logic of IBM’s bid for Sun was clear. It would have instantly put IBM in the catbird seat. SPARC would have been laid to rest, IBM would have migrated the Sun customer base and HP would have struggled to stay relevant. But Sun balked at IBM’s terms, and Oracle stepped in.

Look at the sales figures for the last quarter – the second quarter of the year (2Q09) in a recessionary year, and you see that the sale of smart phones is growing like a rampant weed. Sales grew from 32,272,700 in the previous year (2Q09) to 40,962,800. That’s just under 27% growth when the market for other electronic products is in decline, or even steep decline.

The iPhone Phenomenon

The driver of the market is surely the iPhone, which exhibited extraordinary growth. A year ago when the iPhone was already a phenomenon, Apple sold a mere 892,000 units in the quarter, for 2.8% market share. Admittedly Apple had not yet laid down carrier deals in many markets and so those figures depended mostly on the US and one or two countries in Europe.

Apple still has not colored in every country on the world map and is only just finalizing in China, which will be a huge market. And despite that it sold 5,434,700 units, giving it a growth rate of 609% and vaulting it into 3rd position in the global market with a 13.3% share compared to RIM’s 18.7% share and Nokia’s 45% share.

A Thing Apart

We shouldn’t forget that Apple’s competitors are playing catch-up. It’s no longer just about the phone. It’s now also about the applications, and right now, Apple has such a lead over the competition that you almost feel as though someone should stop the fight. There are two vectors to this. The first is that Apple had the got web browsing on the iPhone right, partly because it invested in a high resolution screen from the get go, making the screen larger in practice than it appears, but also it enabled a whole set of geographical applications that link from maps to apps on the device. Secondly Apple got the developer ecosystem working so that now the vast majority of mobile app developers are pointed at the iPhone and use development software that it Apple oriented.

This will take a lot of catching up, and to make matters worse, a whole new generation of geographical applications are starting to hit the market which can overlay the physical view of a scene with information so you can actually see where the ATM or restaurant is just by looking through the viewfinder of the iPhone camera. While its competitors are still trying to get their application stores active Apple already has over 70,000 software products to offer iPhone users (at last count).

Counting just the handset sales, Apple’s iPhone now accounts for 8% of all mobile phone revenue, but – and here’s the kicker – a huge 32% of the industry’s handset profits. That’s according to figures published by Bernstein Research and based on handset sales in the first half of 2009 – when Apple earned an estimated $5 billion revenue and took its place as the fifth largest player by revenue – behind Nokia, Samsung, RIM, and LG, none of whom have a PC business or a Media business or a software business.

It’s the End-to-end Sales Model

Pleasant though smartphone are the only reason to own one is to run applications and view media. If making calls or sending text is what you’re after you can pick-up a phone that does that for almost nothing. Apple is the only player in the game that has a true end-to-end sales model for music, video and applications. It has the content and application ecosystem sewn up and everyone else is a bit player.

It is also innovating at a rate of knots. It will not be at all surprising to see Apple launching a tablet device that is, well, a platform for playing content and running iPhone apps. There is no other vendor that is even thinking of doing that, and they’ll all start quaking in their shoes when Apple does.

In the iPhone market, Apple is a company that is in desperate need of a strong competitor. Right now there is no sign of one. Microsoft looks like a busted flush in this market, Google is only just getting started and RIM and Nokia are clear also-rans. The only thing stopping Apple from accidentally acquiring a monopoly is the exclusive carrier deals it is tied up with.

Apple will not continue to grow at 600% in this market – mathematics forbids it – but it won’t be long before it displaces Nokia. Maybe a year, maybe two.