Server Sales Strong in Q4 2017

After experiencing declining sales year over year, the beleaguered server executives at Lenovo’s headquarters in Beijing and Morrisville had some good news to savor, according to an industry researcher, IDC’s new report. The report indicated that IBM had even better news with high-end server revenues surging up over 50 percent. The statistics, strategically, quash a recent scathing report from Bloomberg News that criticized the global technology giant’s PCs, smartphones, and servers. The IDC statistics show that Lenovo grew its server sales considerably in the fourth quarter to more than $1 billion. That is a 15 percent step-up year over year and is the third successive quarter growth.

In a recent launch of its new products at the Mobile World Congress, Lenovo applauded the products claiming they were coming off the RTP-based server group’s most favorable financial performance in two consecutive years. The global tech giant has been through the process of reworking its sales force and conducting management reshuffles to curb the decline it was experiencing.

Kirk Skaugen, president of the group’s data center, said the group was accelerating its telecom and IoT strategies based on the increasing global customer demand. He said that the group has started hiring the best talents to help expand its position as No.1 in x 86 servers in terms of customer reliability and satisfaction. The company wants to become the industry leader in communications infrastructure and data center by earning the customers’ trust. The fourth quarter was arguably the first billion-plus quarter that the server team has witnessed in a good while. In fact, quarterly sales have never surpassed the $900 million mark in the first three quarters of the year, including the $727 million from the first quarter.

Despite the good performance in terms of sales, Lenovo experienced a drop in its market share. Even though there was a slight step up from 5.1 percent in the third quarter, the drop from 6.2 percent in the first quarter of 2017 was a shortcoming.

For IBM sales, the IDC report indicated that the IBM revenues surged to more than 50 percent year over year to $2.7 million. In fact, the report credits the new IBM Z14 hardware machines for sparking the surge. On the other hand, Lenovo focuses on the x86 servers business, which is largely built on the x86 group that it acquired for over $2 billion from IBM around four years ago. The report showed that HPE and Dell were tied statistically with IBM in the third position, while Lenovo and Cisco came out even in the fourth position.

The Gartner, Inc. Research

In the current technology environment, most small and medium-sized companies have shifted from investing in servers to cloud-based business subscriptions. However, telecommunication service providers, multinational IT suppliers, social media networks, government organizations, and financial service providers that rely on hyper-scale data centers for their operations are still investing more servers. For example, Dropbox, which is an online storage provider, recently opened an installation in Silicon Valley that utilizes over 9,700 servers. Industry researcher Gartner believes that is an encouraging data point for established businesses in the IT industry.

According to the Gartner report that was released on March 8, 2018, in the fourth quarter of 2017, global brands Dell EMC and HPE were neck-and-neck in the server market based on revenue with 19.4 percent and 19.3% percent market share respectfully.  As the worldwide server market continued growing relentlessly, the server revenue increased by 25.7 percent, while shipments grew by 8.8 percent year over year. While Dell EMC grew 39.9 percent, HPE experienced a growth of 5.5 percent in the fourth quarter. With a 127.8 percent growth, Inspur Electronics recorded the strongest growth.

In server shipments, Dell EMC was still in top position with 18.2 percent market share while HPE took the second position with 13.8 percent despite experiencing a decline of 12.8 percent in server shipments. Jeffrey Hewitt, Vice President at Gartner, associated the growth in the server with the surging demand in strong economies.

Hyperscalers cloud buyers and on-premise businesses all invested significantly in freshening their infrastructure boosting the overall server sales in the fourth quarter of 2017. According to Gartner’s fourth-quarter sales count, the quarterly revenue numbers were remarkable across the globe; global server revenue increased by 25 percent year over year to hit $18 billion while shipping sales jumped by 8.8 percent to 3.19 million boxes. IBM’s mainframe launches of Z14 and POWER9 are major contributors to the percentage improvements year over year.

Regional Results are a Mixed Bag

In general, the Gartner results showed that North America experienced a 27.6 percent growth in revenue and a 9.7 percent improvement in shipments. Asia/Pacific witnessed a 35.1 percent growth in revenue and a 21.2 percent boost in shipments. EMEA showed a 19.9 percent growth in revenue with a decline of 7.9 percent shipments. Japan had a 4.8 percent improvement in revenue with a decline of 5.1 in shipments. And, Latin America experienced a decline of 2.9 percent and 4.7 percent in shipments and revenue respectively.

In the regional results of the EMEA vendor revenue list where performance per brand was quite mixed up, Lenovo took number four with a 27.7 percent increase year over year, while IBM was at position three with a 67.7 percent improvement. HPE retained the number one spot but was level year over year, while Dell EMC ranked with a 43.5 percent. From the regional results, it’s clear that IBM was the best performer on the regional front.

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