Dell surges, overtakes Hewlett Packard Enterprise on server shipments

Success in China sees Dell server sales climb in a tough market.

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Image: Getty Images/iStockphoto

Dell has surged forward in the server market, overtaking Hewlett Packard Enterprise (HPE) on shipments, according to figures from analyst firm Gartner.

In the second quarter of this year Dell moved into the top spot for shipments, with an 8.9 percent jump, although HPE remained the worldwide leader in server revenue, according to Gartner's calculations. In contrast, IBM saw revenue drop 34.4 percent.

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Dell moved into the number one position for worldwide server shipments due mainly to programmes it has in place in the Asia/Pacific region, most notably in China, said Jeffrey Hewitt, research vice president at Gartner. Dell's x86 market success saw it grab a 19.2 percent market share: HPE dropped into second place with 17.2 percent shipment share.

Looking at the market as a whole, in the second quarter of 2016, worldwide server revenue declined 0.8 percent year-on-year while shipments grew by two percent over the same quarter last year, according to Gartner.

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Figures from fellow analyst IDC tell a similar story: worldwide server market revenue declined 0.4 percent year-over-year to $13.4bn in the second quarter of 2016, even though worldwide server shipments increased 2.6 percent to 2.4 million units in 2Q16 when compared with the same year-ago period.

IDC said that overall server market growth has slowed recently, in part due to a pause in hyperscale data center expansion and the continued decline in high-end server sales. And while enterprises spent big on new servers in 2015, that's not happening on the same scale this year.

According to IDC, on a year-over-year basis, volume system revenue increased 5.3 percent and midrange system revenue increased 12.7 percent in the second quarter of the year, to $10.6bn and $1.3bn respectively. Midrange systems were helped by enterprise spending on virtualization and consolidation, "as well as increases in x86-based mission critical systems", said IDC.

Demand for high-end systems dropped 31.4 percent to $1.6bn, and the analysts predicted that these declines in high-end system revenue will continue.

Kuba Stolarski, computing platforms research director at IDC, said server spending in the second half of the year will be driven by cloud data center buildouts from companies looking at hyperscale computing.

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"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," Stolarski said.

According to IDC, HPE retained the number one spot in the worldwide server market with 25.4 percent share in vendor revenue even as revenue decreased 0.3 percent year over year to $3.4bn. Dell made a big jump forward with server revenue growth of 10.0 percent year over year to $2.6 billion, while IBM saw server revenue slide 34.percent year-over-year to $1.3bn as both its Power and System Z mainframes experienced double-digit declines. IBM also sold its commodity server business to Lenovo last year.

Jorge Vela, computing platforms senior research analyst at IDC, said: "In the x86 market, tower servers continue to lead declines among form factors, while rack and density-optimized servers continue their steady growth as hyperscalers expand their reach and offerings."

Demand for x86 servers improved in 2Q16 with revenues increasing 7.3 percent year over year in the quarter to $11.6 billion worldwide while unit shipments increased 2.7 percent to 2.3 million servers. Non-x86 servers experienced a revenue decline of 31.1 percent year over year to $1.9 billion. IDC noted that it continues to track "minimal revenue" from ARM-based server sales, noting that "ARM sales have yet to make an impact on the server market."

IDC gave HP a 25.4 percent market share compared to 19.3 percent for Dell, and that noted that HPE's year-over-year growth rate was impacted by the start of the H3C partnership in China that began in May of 2016. As a result of that, a portion of HPE-designed servers were rebranded for the China market and do not count in HPE's market data.

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