IBM servers crashed in Q4 – just sales, not the mother of all outages

Z refresh cycles slows, bruises Big Blue's server revenue

IBM's worldwide server sales took a turn for the worse in Q4, declining by almost a third as the dust settled on the Z mainframe refresh rush.

The latest stats from Gartner show server vendor revenues climbed globally by an estimated 17.8 per cent in the closing quarter of 2018 to $21.8bn, and all of the major players reported gains – all, that is, except Big Blue.

Kiyomi Yamada, senior principal analyst, said hyperscale and service providers continued to splash the cash on their data centres, "albeit at lower levels than at the start of the 2017". She predicted server demand to continue this year but expects the pace of growth to slow.

Dell EMC again ruled the server market with growth of 22.7 per cent to $4.42bn, giving it a 20.2 per cent share of global sales, up from 19.4 per cent a year earlier. Unit shipments declined 0.4 per cent to 580,580 units, well off the pace of the total market, which grew 8.5 per cent to 3.473 million.

HPE came in a comparatively distant second with revenues of $3.876bn, up 8.4 per cent, giving it market share of 17.7 per cent, down from 19.3 per cent. HPE has pulled out of low-end servers and unit sales fell 4.4 per cent to 424,347.

As for hard-pressed Chinese giant Huawei, it leaped from fifth to third spot in the revenue stakes, growing 45.9 per cent to $1.815bn to snatch 8.3 per cent market share – not bad for a company marred by scandal in the beginning of December. Units were up less than 1 per cent to 260,193. Another Chinese firm, Inspur Electronics, reported revenue of $1,801bn, up 42.9 per cent and unit sales of 293,702, up 24.6 per cent.

Only IBM failed to pile on the sales in Q4, declining as it did by 32 per cent to $1.783bn to leave itself with 8.2 per cent of the spoils. IBM had benefited from what it referred to as the "most successful product cycle to date" for the Z mainframe. According to its own calendar Q4 results, IBM's systems business declined to $2.621bn from $3.33bn.

The "Others" section grew revenue 30.7 per cent to $8.158bn and Gartner reckoned that part of the market grew unit sales by 14.9 per cent to 1,723,032.

Yamada said that the market should anticipate the effects of DRAM oversupply, with memory expected to become much cheaper in the coming months.

Researchers noted EMEA server shipments of 585,698, up 6.6 per cent. The favourite server brands in the region were, in the order of popularity, HPE, Dell EMC, Lenovo, Cisco and Fujitsu.

"Although these levels of growth were positive, a large part of the revenue increase was due to higher component costs – which lead to higher system prices," said Adrian O'Connell, Gartner senior research director.

"Key component supply levels have already significantly eased and we expect this to be passed on to the users in the form of lower server prices as we go through 2019. So, the outlook for revenue will certainly be weaker than in 2018, and the relatively weak level of underlying demand across EMEA also looks set to continue.

"EMEA continues to be a strong region for HPE, and the EMC acquisition continues to drive very good server revenue growth for Dell EMC, but the cyclical nature of the high-end server business is currently hampering IBM." ®




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