Revenues and Shipments were down significantly in comparison to Q3/2015 [shutterstock: 525095398, BluePlanetStudio]

Revenues and Shipments were down significantly in comparison to Q3/2015 [shutterstock: 525095398, BluePlanetStudio]

Gartner: Worldwide Server Revenue, Shipments Declining in Q3/2016

In EMEA, Server Shipments and Revenue Fell Sharply in the Third Quarter of 2016. Conservative spending plans and existing users leveraging virtual machines on x86 servers adding to the decline. Meanwhile, china is closing the gap in shipments.

In the third quarter of 2016, worldwide server revenue declined 5.8 per cent year over year, and shipments declined 2.6 per cent from the third quarter of 2015, according to Gartner, Inc. Among the top five vendors, only Cisco increased revenue in the third quarter, while Huawei and Inspur Electronics saw growth in shipments. HPE, Dell and Lenovo all experienced declines in both server revenue and shipments.

“The server market was impacted during the third quarter of 2016 by generally conservative spending plans globally. This was compounded by the ability of end users to leverage additional virtual machines on existing x86 servers (without new hardware) to meet their server application needs,” said Jeffrey Hewitt, research vice president at Gartner. “Server providers will need to reinvigorate and improve their value propositions to help end users justify server hardware replacements and growth, if they hope to drive the market back into a positive state.”

 

Server providers will need to reinvigorate and improve their value propositions (…)

Jeffrey HewittReserch VP, Gartner

Japan steady

All regions showed a decline in shipments except for Eastern Europe, which posted growth of 0.9 per cent. In terms of revenue, all regions except for Japan experienced a decline. Japan grew by 1.3 per cent.

x86 servers declined 2.3 per cent in shipments and 1.6 per cent in revenue in the third quarter of 2016. All vendors in the top five except for Cisco experienced a decline in revenue. In x86 server shipments, only Huawei and Inspur Electronics experienced growth.

Despite a decline of 11.8 per cent, HPE continued to lead in the worldwide server market, based on revenue, with 25.5 per cent market share (see Table 1). Dell declined 7.9 per cent, but maintained the second spot in the market with 17.5 per cent market share. Lenovo secured the third spot with 7.8 per cent of the market. IBM dropped to the fifth position and experienced the largest decline among the top five vendors.

Table 1

Worldwide: Server Vendor Revenue Estimates, 3Q16 (US Dollars)

 

Company 3Q16

Revenue

3Q16 Market Share (%) 3Q15

Revenue

3Q15 Market Share (%) 3Q15-3Q16 Growth (%)
HPE 3,247,087,045 25.5 3,682,417,477 27.3 -11.8
Dell 2,227,185,685 17.5 2,419,231,403 17.9 -7.9
Lenovo 994,447,261 7.8 1,065,664,119 7.9 -6.7
Cisco 929,440,000 7.3 885,600,000 6.6 5.0
IBM 889,723,595 7.0 1,327,761,197 9.8 -33.0
Others 4,426,866,909 34.8 4,120,053,348 30.5 7.4
Total 12,714,750,495 100.0 13,500,727,543 100.0 -5.8

 

HPE secured the No 1 position in server shipments in the third quarter of 2016, with 18.3 per cent of the market (see Table 2). Despite a decline of 9.8 per cent, Dell secured the second spot with 16.8 per cent market share. Huawei and Inspur were the only vendors in the top five to increase server shipments in the third quarter of 2016.

Chinese Suppliers gaining ground

 

Table 2
Worldwide: Server Vendor Shipment Estimates, 2Q16 (Units)

Company 3Q16

Shipments

3Q16 Market Share (%) 3Q15

Shipments

3Q15 Market Share (%) 3Q15-3Q16 Growth (%)
HPE 493,268 18.3 613,101 22.2 -19.5
Dell 452,383 16.8 501,262 18.1 -9.8
Lenovo 228,097 8.5 242,005 8.8 -5.7
Huawei 163,355 6.1 134,163 4.9 21.8
Inspur Electronics 119,943 4.5 99,417 3.6 20.6
Others 1,234,567 45.9 1,172,725 42.4 5.3
Total 2,691,613 100.0 2,762,672 100.0 -2.6

In Europe, the Middle East and Africa (EMEA), server shipments totalled 481 thousand units in the third quarter of 2016, a decline of 9.7 per cent year over year (see Table 4). Server revenue totalled $2.6 billion, a decline of 12.1 per cent from the third quarter of 2015 (see Table 3).

“This marks the third consecutive quarter of declining revenue in the EMEA market,” said Adrian O’Connell, research director at Gartner. “The spending patterns of large cloud providers made the performance from the third quarter of 2015 difficult to repeat in some countries, however the reality is that demand has been weak across the entire region.”

(…) the reality is that demand has been weak (…)

Adrian O’ConnellResearch Director, Gartner

Dell closing the gap

 

Table 3
EMEA: Server Vendor Revenue Estimates, 3Q16 (US Dollars)

Company 3Q16

Revenue

3Q16 Market Share (%) 3Q15

Revenue

3Q15 Market Share (%) 3Q16-3Q15 Growth (%)
HPE 959,089,295 36.7 1,146,595,287 38.5 -16.4
Dell 444,823,990 17.0 504,411,600 17.0 -11.8
Lenovo 214,695,205 8.2 256,708,306 8.6 -16.4
Cisco 207,900,000 8.0 209,760,000 7.0 -0.9
IBM 165,219,588 6.3 206,419,270 6.9 -20.0
Others 622,735,528 23.8 651,559,257 21.9 -4.4
Total 2,614,463,608 100.0 2,975,453,720 100.0 -12.1

In revenue terms, four of the top five vendors exhibited a decline in the third quarter of 2016. HPE maintained the No. 1 position but showed a revenue share decrease of 1.8 percentage points in the third quarter of 2016. Dell’s server revenue also fell, although its share remained flat, meaning it closed some of the gap with HPE. IBM revenue fell by 20 per cent as it continues to feel the effects of its x86 divestiture.

It also failed to repeat last year’s performance in this quarter, when it benefitted from relatively strong replacement sales. Lenovo held the third revenue-based ranking in the third quarter of 2016, but continued to experience declining revenue (-16.4 per cent).

HPE losing market share

 

Table 4
EMEA: Server Vendor Shipments Estimates, 3Q16 (Units)

Company 3Q16

Shipments

3Q16 Market Share (%) 3Q15

Shipments

3Q15 Market Share (%) 3Q16-3Q15 Growth (%)
HPE 171,671 35.7 207,646 39.0 -17.3
Dell 97,986 20.4 106,619 20.0 -8.1
Lenovo 31,198 6.5 34,577 6.5 -9.8
Fujitsu 21,946 4.6 27,250 5.1 -19.5
Cisco 20,113 4.2 21,366 4.0 -5.9
Others 138,397 28.8 135,647 25.4 2.0
Total 481,311 100.0 533,106 100.0 -9.7

In shipment terms, HPE’s performance was weak, losing more than three percentage points of market share. Second-place Dell and third-place Lenovo managed to maintain their market share by keeping their shipment declines in line with the overall market. This was a positive result given the overall server shipment conditions. Only white box vendors in the ‘Others’ category managed to produce growth in share.

“This is not a sudden slowdown following the UK referendum result, it is a sign of continuing weak demand across the EMEA market with very few drivers having a positive effect,” said Mr O’Connell. “With non-x86 servers falling to less than 12 per cent of overall revenue, the market is highly exposed to the negative effects that virtualisation and external cloud services can have on lower-cost x86 platforms. EMEA is likely to remain a very challenging region for server vendors.”

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