Q4 Server Sales Rise As Massive Market Leader Shift Takes Place

Server Revenue, Shipments Up Slightly As Business Shifts From IBM To Lenovo

Both IDC and Gartner this week reported worldwide fourth-quarter 2014 server sales. While both total server shipments and total server revenue showed small growth for the quarter over the fourth quarter of 2013, the numbers hid a couple of interesting dynamics in the server industry.

The biggest change in the fourth-quarter 2014 server business was IBM's divestiture of its x86 server business to China's Lenovo, resulting in a massive shift of server market share to Lenovo while not totally impacting total sales.

Here's a look behind the server numbers and how the business fared in the fourth quarter of 2014.

Total Q4 Server Revenue Rises A Bit

IDC and Gartner were fairly close in their estimates of the health of the server business in the fourth quarter.

IDC estimated total fourth-quarter 2014 server revenue to be $14.5 billion, up about 1.9 percent compared to its estimate of $14.3 billion for the fourth quarter of 2013. For all of 2014, IDC said server sales rose 2.3 percent to $50.9 billion.

Gartner estimated fourth-quarter 2014 server revenue hit $14.0 billion, up 2.2 percent compared to the $13.7 billion worth of servers sold in the prior year. The research firm said total server revenue for all of 2014 rose 0.8 percent over 2013.

Volume Server Sales Up, High-End Server Sales Plummet

IDC estimated revenue for the volume server business rose 4.9 percent to $10.8 billion, while midrange server sales rose 21.2 percent to $1.4 billion, in the fourth quarter compared to last year.

However, high-end server revenue fell 17.2 percent year over year to $2.3 billion because customers were waiting for a January refresh of IBM's z Systems mainframes to the z13, IDC said.

Server Shipments Hit Record

Server vendors shipped a total of 2.5 million units in the fourth quarter of 2014, up about 2.8 percent over the year before, IDC said. For all of 2014, server shipments worldwide rose 2.9 percent to 9.2 million units, which IDC called a record high.

According to Gartner, total fourth-quarter 2014 server shipments hit 2.7 million units, up about 4.8 percent over the prior year's fourth quarter. The firm estimated total shipments rose 2.2 percent for the whole year over last year.

Bifurcated Server Market

IDC said the server market is serving two distinct types of customer workloads.

The first, which IDC termed "2nd Platform workloads," are traditional workloads requiring rich configurations to consolidate server infrastructure and provide advanced management and automation.

The second, which IDC called "3rd Platform workloads," target virtualized environments for both enterprises and service providers. These next-generation workloads are stateless and scale horizontally, and are not aimed at infrastructure resiliency, IDC said.

Gartner said x86-based server sales in 2014 were driving more by hyper-scale data center and service provider requirements, with enterprises more likely to consolidate their physical server environments via increased use of virtualization.

HP: Growth Slows, But Still Has Comfortable Lead

Hewlett-Packard remained the top vendor in the fourth quarter of 2014, with sales up 1.6 percent to $3.8 billion according to IDC and up 1.5 percent to $3.9 billion according to Gartner.

However, Gartner said that HP's revenue grew despite a drop in shipments of 11.0 percent to 642,000 units, suggesting a shift in sales to servers with richer configurations and higher average selling prices. Gartner said HP's shipment drop was due in part to comparison to very strong shipments in the fourth quarter of 2013 when HP closed some large hyper-scale server deals.

HP's server revenue for all of 2014 hit $13.3 billion, up 0.8 percent over 2013, according to IDC.

IDC also noted that HP's Moonshot server deployments grew enough in the fourth quarter to make early stage ARM server revenue noticeable.

Dell: No. 2 Server Vendor For The First Time

Dell sold $2.4 billion worth of servers in the fourth quarter of 2014, up 11.9 percent over the same period last year, according to IDC. That gave Dell the No. 2spot in server revenue for the first time, IDC said.

Gartner also put Dell in the No. 2 spot, with revenue of $2.4 billion, up 16.9 percent. Dell shipped about 529,400 servers during the fourth quarter, up 5.0 percent over last year, Gartner said.

Full-year 2014 server revenue for Dell rose 5.7 percent to hit $8.9 billion, keeping the company at third place behind HP and IBM, Gartner said.

IBM Gives Way To Lenovo

The sale of IBM's x86 server business to Lenovo, as well as the above-mentioned drop in mainframe sales as customers waited for the January release of the z13, raised havoc with IBM's server numbers.

IBM server sales in the fourth quarter plummeted 48.0 percent to $2.0 billion, IDC said. Most of that drop came from its exiting the x86 server business, although IDC said IBM also suffered double-digit drops in sales of its Power Systems and Z System mainframes in the quarter.

For all of 2014, IBM's server business fell 26.5 percent to $9.4 billion, keeping it at second place between HP and Dell, but likely for the last time.

Gartner estimated IBM's fourth-quarter 2014 server sales at $1.8 billion, down more than 50 percent compared to the same quarter last year. IBM wasn't even in the list of top five server vendors by shipments, according to Gartner.

Lenovo Rises

Thanks to the addition of the ex-IBM x86 server business, Lenovo was the fourth largest server vendor in terms of revenue in the fourth quarter of 2014, with sales rising nearly 750 percent to $1.1 billion. IDC did not break out the Lenovo number according to its original line and the acquired line.

Gartner estimated Lenovo's fourth-quarter 2014 server sales rose just less than 750 percent to $1.1 billion, while its shipments rose 250 percent to breach the 242,000-unit mark. Like IDC, Gartner did not break down the legacy Lenovo vs. legacy IBM server shipments.

Cisco: Still Coming On Strong

Cisco sold about $770 million worth of servers in the fourth quarter, up 19.1 percent, according to IDC. That was enough to give it fifth place for the quarter.

For all of 2014, however, Cisco grabbed the No. 4 spot with sales of $2.9 billion, up just shy of 30 percent, IDC estimated.

Gartner also put Cisco at No. 5 for the fourth quarter with sales of $772 million, up 19.5 percent.

Oracle Ups Its Server Game

While Oracle did not appear on Gartner's list of top five vendors, it did take the No. 5 spot on IDC's list.

IDC estimated Oracle sold $2.3 billion worth of servers for all of 2014, up 1.1 percent over its 2013 sales.

China Rises

In addition to Lenovo, with its strong U.S. presence, two other Chinese server makers made the top five in terms of shipments, Gartner said.

This includes Huawei, whose server shipments rose 29.0 percent to 117,911 units, and Inspur Electronics, which saw a rise in server shipments of 43.1 percent to 91,444 units.

What About The 'Others?'

IDC estimated sales of ODM direct servers, which typically went to hyper-scale data centers, reached $1.2 billion in the fourth quarter of 2014, up 31.4 percent over the prior year. For all of 2014, ODM direct server sales hit $4.0 billion, up 40.5 percent.

IDC also estimated that server revenue from the "Others" rose 14.5 percent to $3.2 billion in the fourth quarter, and rose 26.3 percent to $10.0 billion for full-year 2014.

Gartner also estimated sales of "Others'" servers rose 18.8 percent to $4.0 billion in the fourth quarter. However, shipments in the fourth quarter from "Others" fell 4.3 percent to 1.1 million units.