Total revenue for the storage industry totaled $4.7 billion in the third quarter,
IDC research director Charlotte Rancourt said the revenue decline shows that the storage market is unlikely to pick up any time soon, noting that sales typically increase from the second quarter to the third.
"The fact that the market was down 3 percent is certainly not good news," Rancourt said. Although the number of gigabytes per device is growing, she said, the price per gigabyte of storage is falling faster.
The networked storage market saw the steepest declines, with the network-attached storage (NAS) market declining 10 percent sequentially and the storage area network (SAN) market falling 6 percent compared with the prior quarter.
However, despite the sales drop, IDC said that businesses are still switching their storage from directly attached storage to networked storage.
"When nobody is spending much, it is hard to validate (that) trend," Rancourt said, but added, "when spending does recover, customers are far more likely to purchase network-attached storage than direct attached."
In the NAS market, Network Appliance grabbed the top spot from EMC, which has led for the past several quarters. Network Appliance accounted for 38 percent of the market, with EMC falling to 31 percent. In the SAN sector, HP edged out EMC for the No. 1 position with 30 percent market share, while EMC had 27 percent of revenue. EMC continues to lead the combined network storage market (SAN and NAS) with 28 percent market share.
"EMC had a very difficult quarter," Rancourt said.
Overall, the external storage market, including SAN, NAS and direct-attached storage fell 5 percent from the second quarter. HP leads the overall external market with a 22 percent share of revenue, followed by EMC with 15.8 percent and IBM with 14.6 percent.
The hardware part of the storage industry is also taking a bit of a backseat to the software and networking areas, Rancourt said.
"The hardware is becoming increasingly less important," Rancourt said. "The software that manages the disks, and the network that transports the information, is gaining in importance. The revenue is shifting around."
The result is continued pricing pressure on storage hardware that is unlikely to abate.
"The vendors, all of them, are going to need to (cut costs) to be profitable." Rancourt said.