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IDC Posts Q3 Server Market Data: Dell, HPE & More in Focus

Madhura Bhattacharyya

The worldwide server market continues to grapple with issues. Recently released data on the same by International Data Corporation (IDC) for third-quarter 2019 showed that the industry witnessed a year-over-year decline for two consecutive quarters.

Per data compiled by the research firm, worldwide server revenues dropped 6.7% year over year to $22 billion in the third quarter while overall shipment fell 3% to approximately 3.1 million units.

IDC noticed deterioration in every segment with revenues of volume servers waning 4% year over year to $17.9 billion while the mid-range server decreased 14.3% to $3 billion. Also, high-end system revenues reached $1.1 billion, reflecting a contraction of 23.7%.

Also, x86 servers suffered a blow during the quarter. IDC noted a 6.2% year-over-year shrinkage in x86 server revenues, which totaled $20.6 billion while revenues from non-x86 servers were down 13.1% to $1.4 billion.

However, the research firm observed that rising demand for enterprise compute, backed by next-generation workloads and advanced server innovation, is a positive.

The chart below shows the price performance of the vendors in the past year.

How Are the Vendors Placed?

With respect to individual server manufacturers, there was a tie between Dell DELL and Hewlett Packard Enterprise HPE /New H3C Group for the first spot with 17.2% and 16.8% share, respectively. IDC calls it a statistical draw when the gap among vendors is 1% or less.

Revenues of Dell declined 10.8% year over year. On the last earnings call, management mentioned that the demand environment for servers is under persistent pressure as many customers still clinging to last year's unprecedented growth. However, increasing mix of high-value workload platforms, expanding memory and storage content and lower component cost are positives.

Coming to Hewlett Packard, revenues dipped 3.2% year over year. Per the company, excluding Tier 1s and China, its server units have been growing sequentially since the second quarter of fiscal 2019. In the last reported quarter, the same inched up 2% year over year with higher services intensity.

Inspur/Inspur Power Systems, a China-based company, held the third position with 9% market share. It is the only vendor to have benefited from a rise in both revenues and volume shipment.

The fourth slot is a draw between Lenovo LNVGY and Cisco CSCO, generating 5.4% and 4.9% share of total server revenues each.

Lenovo’s revenues softened 16.9%. Moving on to Cisco, the company’s server revenues improved 3.1% in the third quarter.

In terms of volume, Dell secured the top berth with a market share of 16.4% while HPE clinched the second spot with 14.7% market interest. Inspura and Lenovo captured the third and fourth positions with market stakes worth 10.3% and 6.6 each. Huawei and Super Micro held the fifth position with 5.1% and 4.6% share, respectively.

Is There a Faint Ray of Hope?

Going by a Dell'Oro Group report, the server market will surpass the $100-billion mark by 2023, driven by increasing average selling prices of servers. The firm expects server market revenues to see a CAGR of 7% during the 2019-2023 period while server unit shipments are projected to grow at a low single-digit CAGR.

Rising hyperscale server deployments by cloud-service providers are a major catalyst. AI, edge computing, network function virtualization and other emerging trends are also likely to boost demand for the servers.

Zacks Rank

HPE and Dell carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cisco has a Zacks Rank #4 (Sell) while Lenovo, a Zacks Rank #5 (Strong Sell).

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