Gartner Says Worldwide Server Revenue Declined 2.3 Percent in First Quarter of 2016 

STAMFORD, Conn. June 2 -- In the first quarter of 2016, worldwide server revenue declined 2.3 percent year over year, while shipments grew 1.7 percent from the first quarter of 2015, according to Gartner, Inc.

"Although revenue declined, the first quarter of 2016 continued with a trend of low-level shipments growth on a global level with a variation in results by region," said Jeffrey Hewitt, research vice president at Gartner. “The drop in revenues in light of shipment increases demonstrates that the servers that shipped during the period had lower average selling prices than those that shipped in the same time frame last year.”

All regions showed a decline in either shipments and/or vendor revenue except for Asia/Pacific, which posted 9.7 percent growth in revenue and 8.4 percent growth in shipments for the period.

"The real driver of global growth continues to be the hyperscale data centre segment. The enterprise and small or midsize business segments remain relatively flat as end users in these segments accommodated their increased application requirements through virtualisation and considered cloud alternatives," Mr. Hewitt said.

Hewlett Packard Enterprise (HPE) continued to lead in the worldwide server market, based on revenue, with a 25.2 percent market share (see Table 1). HPE was the only vendor in the top five to experience growth in the first quarter of 2016. Despite a decline of 1.4 percent, Dell maintained the second spot in the market with 17.3 percent market share. IBM secured the third position with 9.7 percent of the market, but experienced the largest decline among the top five vendors.

In server shipments, HPE remained the worldwide leader in the first quarter of 2016, even with a year-over-year shipment decline of 1.6 percent (see Table 2). HPE's worldwide server shipment share was 19.4 percent, representing a 0.6 per cent drop in share from the first quarter of 2015.

Of the top five vendors in server shipments worldwide, only Huawei and Inspur produced shipment increases.

In Europe, the Middle East and Africa (EMEA), server shipments totalled 547 million units in the first quarter of 2016, a decline of 1.3 percent year over year (see Table 4). Server revenue totalled $3.2 billion, a decline of 2.4 percent from the first quarter of 2015 (see Table 3).

"This year is set to be another challenging year for server vendors focused on the EMEA region," said Adrian O'Connell, research director at Gartner. "Ongoing business concerns combined with the consolidation pressures of virtualisation and cloud delivery led to the weakest start to the year from a volume perspective since the downturn in 2009."

In addition, the server market in EMEA continues to suffer from weak levels of demand, exacerbated by sharp weakness witnessed in Russia and other emerging geographies.

In revenue terms, HPE extended the gap with Dell and exhibited a revenue share increase of 2.1 percentage points in the first quarter of 2016. Dell's server revenue was flat, while IBM saw revenue fall by 21.3 percent as it continues to see the effects of the x86 divestiture. Lenovo disappeared from the top five vendor ranking to hold the sixth position in the first quarter of 2016. Lenovo saw another quarter of declining revenue (-14.8 percent) as it struggled to fit the ex-IBM business into its operations in EMEA.

In shipment terms, HPE performance was flat (0.4 percent growth). This was a positive result given the overall server shipment conditions. While Dell's server shipments declined 2.8 percent in the first quarter of 2016, it maintained its share at more than 21 percent year over year. Dell's share grew in detriment to Lenovo, which lost 2.1 percentage points in share year over year.

"We expect server shipments and revenue in the second quarter of 2016 not to be as weak as those achieved in the first quarter of 2016," said Mr. O'Connell. "However, this is all relative, because if the poor performance of server vendors in Russia and related geographies continue to weigh on the market, 2016 will be a tougher year for server vendors in EMEA."

Additional information is available to clients who have access to Gartner's Servers Quarterly Statistics. This database provides worldwide market size and share data by vendor revenue and unit shipments. Segments include: region, vendor, vendor brand, subbrand, CPU type, CPU group, max CPU, platform, price band, operating system and distribution channel.

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Source: Gartner