UPDATED 00:39 EDT / SEPTEMBER 15 2016

NEWS

Dell-HPE battle rages on as server market revenues fall

The newly merged Dell Technologies Inc. has overtaken Hewlett-Packard Enterprise Co. in servers in terms of units shipped, but HPE continues to lead the field in revenues, according to new reports from Gartner Inc. and International Data Corp. (IDC).

The report comes at a pivotal time. Both companies are in the midst of a significant organizational restructuring in order to better position themselves to compete in the new, cloud-centric world of information technology. But they must do so as revenues from their core server market continue to decline revenues.

Gartner’s numbers, released on Sept. 14, show that total worldwide server revenues fell by 0.8 percent to $13.5 billion for the quarter. However, shipments rose 2 percent to 2.75 million units.


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As always, IDC’s figures, published on the same day, were a little different, showing a revenue decline of 4 percent to $13.4 billion, with shipments growing by 2.6 percent to 2.4 million units.

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IDC reckons the server market has slowed because of a “pause in the hyperscale data center expansion,” though it also notes that the high-end segment of the market saw a decline in sales. However, IDC said that the strong results resulting from the 2015 server refresh cycle mean any comparison with this year should be taken with a pinch of salt.

Kuba Stolarski, research director for computing platforms at IDC, said the figures show the server market is performing as expected. He said that while the high-end segment is struggling, “growth in volume servers is still healthy,” an encouraging sign for the market’s prospects going forward.

“As we prepare for the second half of 2016, expect to see market growth led by cloud data center build-outs from key hyperscalers,” Stolarski said. “Looking out further, the market will be impacted by digital transformation initiatives, including the internet of things and cognitive computing, and by a continuing shift towards software-defined infrastructure.”

It’s precisely those changes that have prompted market leaders Dell and HPE to adapt their strategies, though the two companies have gone in very different directions. Just last week, Dell completed its enormously expensive $67 billion acquisition of EMC Corp., creating a combined $74 billion entity that suddenly has fingers in just about every kind of pie there is.

With that merger now done and dusted, Dell Technologies is set to “build on the powerful technology combination, a truly unique solutions portfolio and R&D investment in the platform that will support customers in their transformations into next-generation, software-defined data centers,” Ashley Gorakhpurwalla, president of the server solutions division at Dell EMC, said in a statement yesterday.

Dell’s taking over the top spot in terms of server shipments will taken as an encouraging sign for the company. Jeffrey Hewitt, research vice president at Gartner, said the increased server shipments were most likely thanks to the success of several programs it’s running in the Asia/Pacific region.

In contrast to Dell, HPE has opted to do just the opposite and slim itself down. HPE Chief Executive Meg Whitman takes the view that a smaller, more agile company is better suited to the fast-changing tech industry, and she has taken a number of steps to do so. First she split HPE from HP Inc. (which sells PCs and printers), and most recently, she spun out its enterprise software business and merged it with U.K. firm Micro Focus in an $8.8 billion deal that leaves HPE shareholders with a 50.1 percent stake. Previous to that, HPE also spun out its services business, merging it with Computer Sciences Corp. (CSC).

Of course, the server market isn’t just about Dell and HPE. Rounding out the top five were IBM, Lenovo Group Ltd. and Cisco Systems Inc., in that order, though IDC says Lenovo and Cisco were tied for fourth place. Another serious competitor is the “original design manufacturers” (ODMs), a group of lesser known manufacturers which build white-box systems and saw revenues grow by 13 percent year-over-year to $1.06 billion, ahead of Lenovo and Cisco.

Also worth noting is that HPE, IBM and Cisco all saw their revenues decline in the last quarter. IBM’s revenues fell the most, though that was expected following the sale of its x86 server business to Lenovo in late 2014.

Image credit: James Goblin via flickr.com

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