Server market slumps after seven quarters of growth

The worldwide server market saw a year-on-year revenue slump of 3.6 percent in the first quarter to US$12.4 billion, after a winning streak of seven quarters of growth, IDC said Wednesday.

The slowdown in the market, which also witnessed shipments of servers drop by 3 percent year-on-year to 2.2 million units, is largely put down to an end in the enterprise refresh cycle and what is described as a “pause” in investments in hyperscale server deployments.

Those investments are expected to be back in the second half of this year with a pick up in expenditure on servers for existing data centers and the roll out of new ones.

The slowdown in the server market in the first quarter has not affected key players uniformly. Hewlett Packard Enterprise retained its top position, with revenue of $3.3 billion and a 26.7 percent share of market revenue, after a year on-year growth of 3.5 percent. Dell and IBM retained their number two and three spots respectively, but with year-on-year decline in revenue.

While Dell’s revenue dropped 1.8 percent to nearly $2.3 billion for a 18.3 percent market share, IBM saw its revenue drop by a whopping 33 percent year-on-year to $1.1 billion as it had a triple-digit growth for its z Systems mainframes in the year-ago quarter, after a spike from a system upgrade. Lenovo and Cisco tied for the fourth and fifth position.

Volume system revenue increased 1.8 percent in the quarter to $9.8 billion while revenue from midrange systems increased 8.3 percent in the quarter to $1.1 billion. Demand for high-end systems had a year-over-year revenue decline of 33.4 percent to $1.4 billion, mainly on account of the surge in demand for IBM mainframes last year, IDC said.

The Asia-Pacific region, excluding Japan, had the highest year-on-year revenue growth of 10.2 percent in the quarter. China was a strong contributor to that performance with 14.9 percent year-on-year revenue growth to $1.9 billion. The only other region that saw positive server revenue growth in the quarter was Western Europe at 1.7 percent, IDC said.

Intel  dominates the server processor market with a 99.2 percent share of server chips in 2015. But ARM server chips will starting gaining traction next year, according to a research note from IDC this week.