HP Tops Weak Server Market As Dell Tanks: IDC

The worldwide server market revenue dipped 3.7 percent in the third quarter of 2013, marking the third consecutive quarter of year-over-year revenue decline for the segment, according to IDC's server market report, released last week. The sagging server market is a result of both weak demand for Unix servers and a double-digit decline in sales of midrange and high-end systems, a segment that experienced 17.8 percent to 22.5 percent revenue declines respectively, the market research firm said.

In terms of vendor rankings by revenue, HP regained the No. 1 spot in the worldwide server market, claiming 28.1 percent of the revenue pie -- for a 1.5 percent year-to-year increase. IBM, No. 2 in revenue with 23.4 percent revenue share, experienced a 19.4 percent year-over-year drop, followed by Dell, which saw a 6 percent revenue decrease compared to the same quarter last year and maintained the No. 3 spot with 16.2 percent revenue market share, according to IDC.

[Related: Gartner Q3 Server Shipment Data: HP Halts Slide As Dell Slips ]

Tom Hughes, director of alliances for Technology Solutions Group of Ciber, a Colorado Springs, Colo.-based IBM partner, said his IBM business is strong. "I see steady demand for IBM servers. A lot of demand is based on life-cycle refreshes. We are seeing some good opportunities with our IBM customers around Power and X Series servers," Hughes said.

HP regained the top spot, according to IDC, thanks to improved demand for x86-based ProLiant servers. "[HP CEO] Meg Whitman's restructuring of HP has made a big impact on the company's ability to increase its server business," said Jed Scaramella, research manager in the enterprise server group at IDC. HP is two years into a five-year turnaround plan to get costs in line with sales, he said.

Poor quarterly performance at IBM is blamed on weak demand for Unix servers. "Unix servers experienced a revenue decline of 31.3 percent year-over-year to $1.3 billion, representing 11.1 percent of quarterly server revenue for the quarter. This was the lowest quarterly Unix server revenue ever," according to the IDC report.

Scaramella said that IBM's heavy presence in the Unix market contributed to its quarterly decline, but added that this was an off year for the Unix refresh cycle. Companies are expected to replace Unix servers in early 2014, which could give IBM a lift, he said. On the bright side, sales of IBM's System z mainframes, running IBM's proprietary z/OS, actually grew for a fourth consecutive quarter, with sales of those systems making up some 6.8 percent of all server revenue for Big Blue in the third quarter.

Proprietary Unix and mainframe servers have been on the decline over the past several years, replaced by Linux server demand, IDC said.

Meanwhile, the Linux server market is solidly on the rise, with demand up 5.6 percent year-over-year, according to IDC. The Linux servers now represent 28 percent of all server revenue, up 2.5 points when compared with the third quarter of 2012. Driving that growth, IDC said, are cloud infrastructure deployments.

The march to the cloud, said IDC, is at the heart of server growth. "Server applications are shifting more and more server demand into cloud service provider data centers, which is opening up new market opportunity for both ODMs and Chinese OEMs," IDC said.

Original design manufacturers server makers -- such as Quanta Computer, Wistron Group and Compal Electronics -- saw demand grow 45.2 percent year-over-year, according to IDC. It also reported that 9.6 percent of ODM direct server revenue was generated in the U.S. in the quarter primarily through sales to Google, Amazon, Facebook and Rackspace.

The cloud also represents new growth for IBM partner Technology Solutions Group of Ciber, Hughes said, who added that Big Blue's recent acquisition of the public cloud vendor infrastructure-as-a-service firm SoftLayer will be a key to boosting its cloud business in 2014.

PUBLISHED DEC. 9, 2013