Gartner: North America Propels Server Growth, With HP Leaving Dell Behind

Third-quarter North American server sales and shipments grew over last year thanks in large part to a strong growth in Hewlett-Packard and Cisco sales, which more than made up for major weaknesses in Dell and IBM's server sales, Gartner reported on Wednesday.

Growth in sales to North America, along with those to Africa and the Middle East, led the world's third-quarter 2013 server business, which overall saw a weak 1.9 percent growth in shipments and a 2.1 percent drop in revenue over last year, Gartner reported.

While North America, particularly Canada, kept the worldwide server market in positive growth in the third quarter, it was the Middle East and Africa region where growth was strongest, albeit from a smaller base, said Jeffrey Hewitt, research vice president at Stamford, Conn.-based Gartner.

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"Some local growth came there thanks to a build-out of Web infrastructures," Hewitt said. "In many parts of the world, smartphones are the main device people use for banking, trade and commerce. Not PCs. I suspect that's where some of that growth came from."

In North America, HP in the third quarter continued its server market dominance with sales of over 256,000 servers, up 22.5 percent over last year. That led to revenue of about $1.4 billion, up 8 percent over last year, Hewitt said.

"HP came back," he said. "But the company needs to fix some sales execution issues. They know that. Also a concern going forward is what impact HP might feel from increasing ODM sales to Web-scale companies."

Dell kept its No. 2 position with shipments of just over 209,000 units, down 22.3 percent over last year. Dell revenue did better, falling only 6 percent to $1.0 billion, Hewitt said.

The rise in HP sales and the drop in Dell sales were also seen worldwide, Gartner reported. This is despite Dell's strong growth in first- and second-quarter 2013 sales together with weak HP sales, which had raised the possibility that Dell might be in line to grab the No. 1 spot from HP.

That did not happen, Hewitt said.

Part of the reason is that, with Dell moving to become a private company, customers may have slowed down orders with the company to wait to see how the shift would play out, Hewitt said.

"Also, how much of the drop can we attribute to a Microsoft buying cycle?" Hewitt said. "We know Microsoft has been buying Dell for its data centers."

NEXT: Understanding HP's Strength Vs. Dell And Cisco

Jim Ganthier, vice president of worldwide marketing and operations for HP servers, wrote in a statement emailed to CRN that the Gartner report shows how HP is adapting to the changing market conditions to stay ahead of the curve.

"HP continues to lead the market by responding to enterprises current and emerging needs, leaping a generation ahead in the hyperscale segment with HP Moonshot and continuing our leadership in the traditional x86 market," Ganthier wrote.

Ganthier also wrote that HP ProLiant has been the top server brand for the last 70 quarters. "That's a legacy that none of our competitors can beat. Our game changing innovations and clear, compelling value propositions deliver business results that keep customers coming back to HP each quarter," he wrote.

Dell declined to respond to a request for comment on the new Gartner report, other than to refer to a blog post, which Forrest Norrod, vice president of server solutions for the company, wrote last month when CRN reported preliminary Gartner second-quarter 2013 server numbers.

"An individual vendor's server shipment market share is not always linear quarter over quarter and Dell has gained unit share in five of the last eight quarters. There can and will be fluctuations but the larger point remains the same that Dell continues to gain share. For example, one vendor can close one big deal, even at a loss, to gain on shipment share. And to be frank, that's exactly what happened here," Norrod wrote in his blog.

Taking the third spot in North American server shipments is Cisco, which shipped nearly 40,500 units, up 19.1 percent over last year. Revenue for Cisco reached $389 million, up a huge 50.6 percent to give it the No. 4 spot in sales, Gartner reported.

Cisco continues to take advantage of its strategic relationships with the top storage vendors including EMC, NetApp and Hitachi Data Systems, as well as its nearly ubiquitous networking presence in the data center, Gartner's Hewitt said.

"People are buying more integrated systems. ... We're seeing some relationship between existing storage vendors and which server vendor is chosen," he said.

NEXT: IBM Stumbles Thanks To Lenovo, NSA

HP has been pushing hard against Dell and Cisco, and it is reaping the rewards, said Chris Case, president of Sequel Data Systems, an Austin, Texas-based solution provider and long-term HP partner.

"HP has definitely put some programs in place," Case said. "And Meg [Whitman, HP CEO,] is definitely not shy about saying HP needs to go after Dell and Cisco. And they are, with some aggressive incentives that are working."

Cisco in the last couple of quarters seeded several customers with empty blade server chassis at no cost, making it easy for customers to decide to buy Cisco blades, Case said. "We saw that a lot," he said. "But last quarter, they seemed to pull back from that program. It didn't seem to be a big factor in their competition with HP."

HP, however, in September rolled out HP OneView, a management software designed to go head-to-head against Cisco's management capabilities, Case said.

"HP did well with OneView," he said. "We did a lot of demos and NDA presentations that might have helped HP stave off Cisco."

The No. 4 spot for North America server shipment went to IBM, where server shipments fell 32.8 percent to just under 40,000 units. That translated into a revenue drop of 16.8 percent over last year to $1.0 billion, which was still high enough to give it a solid third place, Gartner's Hewitt said.

IBM, which also saw a 18.9 percent drop in worldwide server revenue and a 28 percent drop in worldwide server shipments over last year, suffered from a double-whammy, Hewitt said.

The first factor was the uncertainty caused earlier this year by IBM's consideration of a move to sell part of its server business to Lenovo. "The data center market is still conservative," he said.

Part of that uncertainty also stemmed from concerns, particularly from China, over alleged spying by the U.S. National Security Agency (NSA), Hewitt said.

"China has reinvigorated its internal infrastructure, partly as a result of NSA spying activities," he said. "Customers there are asking 'Can we trust you?' And customers there are part of the government."

No. 5 in the North American market is SGI, with shipments of over 22,000 units, up 26.8 percent over last year. SGI server revenue was just over $82 million, up 10.3 percent, to give it the No. 6 spot in sales, Gartner reported.

NEXT: The Rising Impact Of Web-Scale Companies And "Others"

Lenovo did well in North America, overtaking Oracle in server shipments with sales of nearly 8,200 units, up 33.7 percent. However, with revenue of only $20.4 million, Lenovo took seventh place in that part of the market.

In North America, server sales from the "other vendors" are impacting the market.

Those "other vendors" accounted for shipments of over 322,000 servers, up 14.7 percent over last year, Gartner said. That put them collectively at the top of the list of shipments. Sales of those vendors rose 14.7 percent to $391 million.

Not included in the "other" category, however, are ODM sales to Web-scale companies such as Facebook, Yahoo and Google, Gartner's Hewitt said. They purchased nearly 179,000 units, up 20 percent over last year. The revenue of those servers was also up 20 percent to reach about $465 million, Hewitt said.

PUBLISHED DEC. 4, 2013