Cisco Q1 Blade Server Sales Top HP In NA (At Least By Revenue)

Cisco Systems has overtaken rival Hewlett-Packard to become the No. 1 x86 blade server vendor in North America by revenue for the first quarter, according to the most recent market-share data from industry analyst IDC.

Cisco's ascent to the top knocks HP down to the No. 2 spot for the first time since 2006. While Cisco grabbed the first-quarter lead when looking at the market by revenue, HP maintains the No. 1 spot in terms of units shipped in North America, IDC said.

Paul Perez, vice president and chief technology officer of Cisco's data center business, said it was the steady growth of Cisco's Unified Computing System (UCS) converged infrastructure offering, launched in 2009, that allowed the networking giant to finally leap-frog HP.

[Related: Server Market Shrinks In The First Quarter: 10 Takeaways From IDC's Market Share Report ]

"To get to No. 1 in a tough market is a great achievement and I'm extremely proud of the team," Perez told CRN. "When we saw the news and confirmed that it was official, I left [Cisco CEO John] Chambers a voice mail, telling him that I felt very privileged to be able to run such a great team."

The IDC data, shared with CRN Tuesday by Cisco and later confirmed by IDC, shows that Cisco accounted for 40 percent of the total North American blade server market, with $306 million in revenue, in the first quarter of 2014. HP, meanwhile, accounted for 34.9 percent with $267 million, while Dell accounted for 12 percent with $92 million and IBM for 10.2 percent with $78 million.

HP had been the x86 blade server market leader in North America by revenue since the fourth quarter of 2006, according to Kuba Stolarski, research manager at IDC.

Stolarski said Cisco's massive install base in networking has likely contributed to its recent wins in the server arena.

"From a general IT perspective, obviously Cisco has a lot of good relationships with their existing customers, and I do think a big chunk of their sales comes from essentially bundling their networking and server offerings to the same customer," Stolarski said. "I think in a lot of cases and, smartly so, they have used their existing relationships with networking customers to have them give them a shot [in servers]."

HP is still the blade server market leader in North America in terms of units shipped, according to IDC. HP shipped roughly 34,000 blade server units during the first quarter, while Cisco shipped nearly 26,000. That said, HP's unit shipments in the quarter slipped more than 19 percent compared with the same period last year, while Cisco's jumped 17 percent year over year.

HP is also still the No. 1 x86 blade server vendor by revenue worldwide, with a 43.7 percent share, compared with Cisco's 24.4 percent, IDC data shows.

Cisco launched UCS five years ago much to the skepticism of its competitors, which questioned how the company could gain a foothold in the server market so late in the game. But Perez said Cisco has more than proved it can hold its own, having grown UCS into a $2.5 billion business with more than 33,000 unique customers.

Perez said Cisco for the past few quarters has been adding about 1,000 new customers to its UCS install base each month. UCS includes Cisco blade servers, which are designed for virtualized or converged infrastructure environments.

Looking ahead, Perez said his sights are set on dethroning HP again to become the No. 1 vendor in the x86 blade server market worldwide.

Perez said recent enhancements to UCS, such as the integration of the Invicta flash storage technology Cisco gained through its Whiptail acquisition last year, are laying down the "railroad tracks'" to help make that happen.

"I didn't spent 30 years in this industry to finish second or third," Perez said. "We are definitely going for No. 1."

In a comment provided to CRN, HP noted that it still has a leg up on Cisco in the x86 server market at large.

’According to IDC data for Q1, HP has outsold Cisco in the worldwide overall x86 server market eightfold," said an HP spokesperson in an emailed statement. "The market results reflect that customers continue to award HP for our innovation and the business outcomes we help them achieve.’

NEXT: Cisco Partners Seeing Big UCS Growth

Cisco partners said they aren't surprised to see Cisco's recent gains in the blade server market, especially given the success they are seeing within their UCS businesses.

"I think it's fantastic and the news validates all the activity we have seen over the last two years or so," said Jim Kavanaugh, CEO of World Wide Technology (WWT), a Maryland Heights, Mo.-based Cisco Gold partner ranked No. 13 on CRN's 2013 Solution Provider 500 list. "It's really pretty incredible to see Cisco roll out this new compute platform and see the traction they have gained in such a short period of time."

Kavanaugh said WWT's UCS business is up more than 65 percent year over year, and that WWT is on track to hit $225 million in UCS sales this year. He said UCS sales are strong in all of WWT's customer segments, traction he attributes to the flexibility, management capabilities and overall performance of UCS.

"We are seeing good growth in the service provider space, the enterprise space and the overall public sector," Kavanaugh said.

Paul Lidsky, president and CEO of Datalink, an Eden Prairie, Minn.-based Cisco Gold partner ranked No. 52 on 2013 Solution Provider 500 list, said he isn't surprised by Cisco's traction in the server market, and that Datalink's own investments in UCS have definitely paid off.

"We decided as a company to start selling the UCS line back in January 2010 and, at that point, we were making a big bet ourselves on the server industry because we were partnering with Cisco and, by definition back in 2010, that meant it would be difficult to partner with IBM and HP," Lidsky said. "We knowingly partnered very directly with Cisco. In fact, it’s the only server that we sell. So we made a big bet, and that bet is paying off."

Lidsky said his UCS business, much of which comes from sales of NetApp FlexPod, VCE Vblock and other converged systems that use UCS servers, is expected to be up about 30 percent this year.

PUBLISHED JUNE 3, 2014