Cloud vendors burp after last year's server sales feast, couldn't possibly eat any more

Not even a wafer-thin blade?


The global server market hasn't been able to match the heady highs of 2018 so far this year and Q3 was no exception as both shipments and the value of those boxes dropped.

Vendors managed to sell 3.1 million servers during the three months, down 3 per cent year-on-year, equating to revenue of $22bn, itself down 6.7 per cent. But number-cruncher IDC said things are not as bleak as they seem.

Paul Maguranis, senior research analyst, noted: "While the server market did indeed decline last quarter, next-generation workloads and advanced server innovation (e.g. accelerated computing, storage-class memory, next generation I/O etc.) keep demand for enterprise compute at near historic highs... In fact, 3Q19 represented the second biggest quarter for global server unit shipments in more than 16 years, eclipsed only by 3Q18."

2018 was a bumper year for server revenues as the hyperscale cloud builders feasted on systems to feed customers' insatiable desire for services.

Dell kept the top spot in Q3 despite a 10.8 per cent fall in server revenues to $3.779bn that left it with a market share of 17.2 per cent. IDC actually put the Texan tech outfit in a statistical tie with HPE/New H3C Group grabbing 16.8 per cent market share on a revenue slide of 3.2 per cent to $3.691bn.

Remaining in third is Inspur/Inspur Power Systems with a 9 per cent market share worth $1.973bn, up 15.3 per cent on the same period of 2018. Fourth and fifth places were filled by Lenovo and Cisco with 5.4 per cent and 4.9 per cent share each: Lenovo declined 16.9 per cent to $1.188bn and Switchzilla was up 3.1 per to $1.073bn.

The ODM Direct (Original Design Manufacturers) tier also felt the pinch this time around, falling 7.1 per cent to $5.816bn, accounting for 26.4 per cent of the spoils. The rest of the market, at $4.473bn, was down 12.1 per cent.

In terms of geography, Asia-Pacific (excluding Japan) grew marginally by 0.2 per cent, Japan grew 3.3 per cent and China managed a jump of just 0.7 per cent.

Over in Europe, the Middle East and Africa, revenue was down 9.6 per cent, 10.7 per cent in the US and 14.2 per cent in Latin America.

More from IDC here.

Dell warned last month of tough times ahead and knocked $1bn of group estimates for the remainder of its fiscal '20, blaming the Chinese economy and ongoing Intel shortages hitting PC sales.

Chairman of products and operations Jeffrey Clarke said many of its server customers were still digesting the binges of last year.

IDC said Dell had been "more selective on larger server deals, particularly in China and in certain enterprise accounts where competition continues to be notably pronounced."

"Dell was the only US server vendor to execute well in China in 2018. This was almost entirely with large Chinese hyperscale cloud customers. This year, the local Chinese suppliers including Inspur, Huawei and Lenovo are being far more aggressive in their pursuit of business with these clients. Dell has walked away rather than taking the business at breakeven (or even a loss in some instances)." ®


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