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Cisco, HP Among Winners in Slowing Server Market
Cisco, HP Among Winners in Slowing Server Market
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
DECEMBER
04
2013

Although the PC market is declining, the server industry is still posting gains, albeit slight ones. In the third quarter of 2013 worldwide server shipments grew 1.9 percent year-over-year, according to Gartner.

However, not all the news is good. Server revenue declined 2.1 percent from the third quarter of 2012.

Jeffrey Hewitt, research vice president at Gartner, put it more bluntly. He said the worldwide server market remains in a relatively weak performance mode as we move through the second half of the year.

"There were only three regions that exhibited positive vendor revenue growth. They were Canada at 6.5 percent, the Middle East and Africa at 12.1 percent and the United States with 0.9 percent growth," Hewitt said. "In shipments, the Middle East and Africa had the greatest increase at 13 percent compared to the third quarter of 2012."

IBM Sees Double-Digit Declines

Hewlett-Packard had the lead in the worldwide server market based on revenue. The company posted just more than $3.4 billion in server vendor revenue for a total share of 27.6 percent worldwide for the third quarter of 2013. This was up 2.2 percent year-on-year. HP and Cisco were the only vendors in the top five to have revenue increases in the third quarter of 2013.

"x86 servers maintained low levels of growth at 2.1 percent in units year-on-year and 4.4 percent in revenue," Hewitt said. "RISC/Itanium Unix servers continued to decline at 4.5 percent and 31 percent in vendor revenue compared to the same quarter last year. The 'other' CPU category, which is primarily mainframes, showed an increase of 7.8 percent."

Second-ranked IBM saw its revenue decline 19.2 percent as the positive effects of its mainframe refresh diminished. Fourth-ranked Fujitsu was amongst the three vendors in the top five to see a revenue decline, at 1.5 percent.

Cisco, ranked in the No. 6 position, closed the gap with fifth-ranked Oracle in the third quarter of 2013, with less than 1 percent market share difference between the two vendors. Cisco achieved a double-digit shipment growth. Gartner said Cisco's focus on the blade server segment is helping it to drive strong competitive gains at a time when the overall market is becoming increasingly constrained.

What's Cisco's Secret?

We turned to Zeus Kerravala, principal analyst at ZK Research, to get his take on the results. He told us there are two key reasons Cisco is edging up in the rankings. First, the company offers a relatively low base. Second, it took advantage of a market opportunity to create a server optimized for virtual data centers.

"I almost think the industry should be a little bit embarrassed that a relative newcomer like Cisco with no brand in servers at all came in and continues to put up good numbers," he said.

As Kerravala sees it, Cisco is offering the industry a good lesson: requirements change through technology shifts. What customers need in a server today, especially high-performance servers like the ones Cisco offers, is different than what customers needed five years ago.

"Cisco focused on building a server that orchestrates well with the network and offers different ways of managing memory, along with options that are more in line with the virtual data center," Kerravala said.

"Frankly, I think the rest of the server industry sat around and let Cisco take that business. In fact, I think in many ways IBM has taken much of the brunt. It used to be if you were looking at high-end servers it was an IBM or HP decision. Now it seems like an HP or Cisco decision. It shows that there is indeed room in the market to innovate. I just don't think it's been the traditional server vendors that have done the innovation."

Read more on: Server Market, Cisco, HP, IBM, Fujitsu, Oracle
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