According to research firm IDC, factory revenue in the worldwide server market decreased -2.2 percent year-over-year to $10.9 billion in the first quarter of 2014 (1Q14). This is the fifth consecutive quarter that the server market has experienced a year-over-year decline in worldwide revenue.
Server unit shipments improved 2.1 percent year-over-year in 1Q14 to 2.1 million units as investments in hyperscale datacenter capacity were largely offset by consolidation, which continued to be a strategic focus for many large and small customers around the globe.
On a year-over-year basis, volume systems experienced 3.9 percent revenue growth. This was the fourth consecutive quarter that volume system demand increased year-over-year.
At the same time, demand for midrange and high-end systems experienced year-over-year revenue declines of -4.8 percent and -25.6 percent respectively in 1Q14.
The midrange and high-end markets were impacted by difficult year-over-year comparisons combined with transitions in the technology refresh cycles typical for these segments.
“The server market continues to be heavily influenced by the emergence of the 3rd Platform as mobile, cloud, big data, and social enablement drive significant hyperscale server deployments globally,” said Matt Eastwood, group vice president and general manager for enterprise platforms at IDC.
“At the same time, traditional client-server workloads continue to drive investment in private cloud facilitation as traditional SMB and enterprise customers drive consolidation and automation deeper into their environments. The net effect is an increasing concentration of computing power into fewer and larger enterprise and service provider datacenters around the world.”
Overall server market standings, by vendor
HP held the number 1 position in the worldwide server market with 26.5 percent factory revenue share for 1Q14. HP’s -2.0 percent revenue decline included stable demand for x86-based ProLiant servers and continued weakness in Itanium-based Integrity server revenue.
IBM held the number 2 spot with 19.1 percent share for the quarter as factory revenue decreased -25.4 percent compared to 1Q13. Demand for IBM’s x86-based System x servers and System z mainframes declined sharply year-over-year.
Dell maintained the third position with 18.0 percent factory revenue market share in 1Q14 as factory revenue declined -3.2 percent compared to 1Q13.
Cisco, Fujitsu, and Oracle ended the quarter in a three-way statistical tie for the number 4 position with 5.7 percent, 5.0 percent, and 4.9 percent factory revenue share respectively.
Cisco’s 1Q14 factory revenue increased 37.0 percent compared to 1Q13, gaining 1.6 points of market share, and Oracle’s factory revenue was up 1.9 percent year-over-year in 1Q14.
Top server market findings
? Demand for x86 servers improved in 1Q14 with revenues increasing 4.9 percent year-over-year in the quarter to $8.9 billion worldwide as unit shipments increased 2.5 percent to 2.1 million servers. HP led the market with 29.6 percent revenue share based on 0.4 percent revenue growth over 1Q13. Dell retained second place, securing 22.0 percent revenue share.
? Non x86 servers experienced a revenue decline of -25.2 percent year-over-year to $2.0 billion representing 17.9 percent of quarterly server revenue. This was the eleventh consecutive quarter of revenue decline in the non-x86 server segment. IBM leads the segment with 57.2 percent revenue share following a year-over-year revenue decline of -31.0 percent when compared with the first quarter of 2013.
? Blade servers, which are highly leveraged in enterprise’s virtualized environments, increased 2.3 percent year-over-year to $2.0 billion. Blades now account for 18.0 percent of total server revenue. HP maintained the number 1 spot in the blade server market in 1Q13 with 43.7 percent revenue share; Cisco held the second position in the blade market with 24.4 percent revenue share; and IBM held the third position with 12.3 percent revenue share.
? Density Optimized servers, utilized by large heterogeneous datacenters, experienced weaker demand in 1Q14. Revenue declined -10.8 percent year-over-year in 1Q14 to $649 million as unit shipments decreased -6.0 percent to 215,567 servers. Density Optimized servers now represent 6.0 percent of all server revenue and 10.4 percent of all server shipments.
“Market observers should not be fooled by the decline in density optimized server revenue this quarter,” said Kuba Stolarski, research manager for servers at IDC.
“This quarter’s decline in density optimized sales is indicative of temporarily lower demand from one or two very large customers who utilize density optimized servers for particular workloads. The demand should return shortly, at which point density optimized servers will return to growth. Furthermore, the decline in density should not be misinterpreted as an indicator of overall cloud Hyperscale server demand. Although dense form factors are used extensively in large cloud Hyperscale environments, many of the largest cloud service providers continue to favor rack-optimized servers in their datacenters.”
