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Anaemic hyperscale orders hurt server makers in Q1

Pump down the volume

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A pause in hyper-scale deployments has triggered the first year-on-year decline in seven quarters for global server shipments and revenues.

Also a “clear end to the enterprise refresh cycle” contributed to the Q1, 2016 slow down, according to IDC, the tech market watcher.

In essence, Q1 2015 revenues were flattered by a major IBM System z upgrade – which sparked a big customer refresh. The end of that tail-wind means that 1Q1 demand for high-end systems fell 33.4 per cent to $1.4bn in Q1 2016.

IDC has come up with slightly different numbers from its arch-rival Gartner. IDC reckons revenues fell 3.6 per cent year-on-year to $12.38bn in Q1, while server shipments fell three per cent to 2.2 million units.

Gartner’s number crunchers estimate a 2.3 per cent revenue decline to $13.09bn and 1.7 per cent shipment rise (figure not published) for the quarter. It says all unit growth came from mostly low-end shipments in the Asia-Pacific.

Gartner and IDC agree on the vendor revenue rankings, with HPE at number 1 (26.7 per cent – IDC numbers), followed by Dell (18.3 per cent), IBM (9.2 per cent), Lenovo (7.0 per cent) and Cisco. They agree that HPE has increased its lead over the Dell year on year – and that it is the only top five vendor to record revenue growth.

IBM experienced the biggest sales fall – down $600m year on year to $1.27bn – but this is hardly surprising given the lack of a mainframe bonanza in the quarter and the continuing fallout from its withdrawal from the low-end of the market following the sale of its x86 server business to Lenovo in late 2014.

IDC breaks down the rest of the global server market – about 32 per cent by revenue – into ODM Direct (seven per cent share and revenues down 11 per cent) and ‘Others’ (24.9 per cent).

Others is where the giant cloud service providers live as well as fast growing Chinese server makers Inspur and Huawei. This may be the reason for the nine per cent uptick in revenue growth in the quarter, despite the hyperscale sales sluggishness.

Despite Q1, hyperscale deployments are the future for most server makers. Cloud and virtualisation initiatives will dampen growth prospects just about everywhere else. ®

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