Server Market Decelerates in Q1: DELL, HPE & Others in Sight – Yahoo Finance

Server Market Decelerates in Q1: DELL, HPE & Others in Sight  Yahoo Finance

Here’s a sneak peek of the worldwide server market performance in the first quarter of 2019, per IDC report.

The server market, which was showing signs of recovery beginning 2017, seems to have again landed in troubled waters. After experiencing six consecutive quarters of double-digit revenue growth, the market seems to have slackened in 2019 with a single-digit revenue rise witnessed in the first quarter.

Per International Data Corporation (IDC) data, worldwide server revenues inched up 4.4% year over year to $19.8 billion in first-quarter 2019 while overall shipment dipped 5% to below 2.6 million units.

Going by IDC, revenues of volume servers increased 4.2% year over year to $16.7 billion while the mid-range server registered a 30.2% surge to $2.1 billion. However, high-end system revenues for a second consecutive quarter showed a steep decline of 24.7% to $976 million.

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Also, IDC noted a 6% year-over-year climb in x86 server revenues, reaching a value of $18.5 billion, while revenues from non-x86 servers dropped 13.7% year over year to $1.3 billion.

The research firm observed that a decline in demand from both enterprise buyers and hyperscale companies coupled with a tough year-over-over comparison was an overhang on the growth rate during the reported quarter.

Although lower unit shipments was a blow, the firm added that higher average selling prices (ASP), courtesy of enterprise’s demand for richly configured servers, boosted the revenue growth rate for many vendors.

The reason for this stellar market-share growth is that the company has been able to strategically capitalize on expanded opportunities from the EMC acquisition. On the last earnings call, management mentioned weakness in the China market to be a relentless headwind. However, the company’s focus on acquiring new customers is likely to boost its top- and bottom-line growth going forward. Shares of the company have gained 11.1% in the year-to-date period.

The third position is a draw among Inspur/Inspur Power Systems, Lenovo LNVGY and Cisco CSCO, generating 6.2%, 5.7% and 5.3% share of total server revenues, respectively. IDC calls it a statistical tie when the gap among vendors is 1% or less.

IDC believes that soft unit shipment volumes can be offset as long as surging demand for richly configured servers supports an uptick in ASP.

Moreover, we believe, a ramp-down in hyperscale spend will be temporary as demand for cloud services is consistently robust. The global server market will steadily grow in the quarters ahead, mainly owing to hyperscale server deployments by cloud-service providers.

There is a huge growth opportunity in the hyperscale server-infrastructure space with more and more companies shifting to cloud-based services. Moreover, proliferation of technologies, such as big data, artificial intelligence and machine learning are driving demand for hyperscale servers.

Also, Gartner’s latest forecast for IT spending (reflecting 3.2% improvement in 2019) depicts a favorable tech expense environment, which we believe, will positively influence the overall server market in the near term.

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