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Server sales drop again in Q1; IBM bleeds share, Cisco gains, H-P flat

  • IDC estimates global server sales fell 2.2% Y/Y in Q1, a slightly smaller decline than the 4.4% drop seen in Q4. Gartner, however, puts the decline at 4.1%.
  • The embrace of white-label hardware by Web giants continues taking a heavy toll: IDC thinks white-label sales, which it calls ODM Direct, grew 75% Y/Y (up from Q4's 47% clip) and made up 7.3% of industry revenue, up from 6.4% in Q4 and 4.1% a year ago.
  • IDC estimates market leader H-P (HPQ) saw its share hold steady at 26.5%, after having grown (at IBM's expense) 260 bps Y/Y in Q4. #2 IBM, whose hardware sales have been battered, saw its share fall 600 bps Y/Y to 19.1%.
  • #3 Dell's share slipped 20 bps to 18%, while #4 Cisco (CSCO), which just reported a 29% Y/Y April quarter sales jump for its UCS server segment, saw its share rise 170 bps to 5.7%. #5 Oracle (ORCL), whose server sales are finally stabilizing thanks to engineered systems growth, rose 20 bps to 4.9%.
  • Sales of x86 servers, over 90% of which contain Intel (INTC) CPUs, rose 4.9% after growing 7.8% in Q4. Non-x86 server sales tumbled 25.2%, and now make up just 17.9% of industry revenue.
  • Cisco now has an estimated 24.4% of the blade server market, behind only H-P's 43.7%.
Comments (11)
  • leopardtrader
    , contributor
    Comments (1322) | Send Message
     
    NSA spying issues using these companies is serious and now showing in IBM. It is pretty wrong to actively deploy government intelligence gathering using companies that serve competitive markets. A wrong move that could go on to hunt these companies. Hard to gain trust but quick to destroy.
    30 May 2014, 06:47 PM Reply Like
  • medzjohn
    , contributor
    Comments (268) | Send Message
     
    Agree, but the companies complied so their customers are right to judge them harshly.
    1 Jun 2014, 10:15 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1100) | Send Message
     
    SMCI had a nice 35% revenue growth and 135% profit growth yoy making x86 servers. Their servers are probably classified as ODM Direct.
    30 May 2014, 06:51 PM Reply Like
  • alpine
    , contributor
    Comments (1200) | Send Message
     
    Any idea if they are supplying to the hypervolume server buyers such as Verizon, Google, AWS or Microsoft Azure? If not, who are their customers and are the customers mainly US based?
    31 May 2014, 04:58 AM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1100) | Send Message
     
    Yes they do. If you read their transcripts, they call this "internet data center" revenue and it was about 15% of their revenue last quarter. Their other customers are enterprises, i.e., ordinary businesses. While everyone talks about the amazon google and microsoft clouds nowadays, most businesses still buy their own servers.

     

    You can find SMCI equipment on amazon and newegg, so I am sure some clients are even small businesses and individuals.

     

    They sell all over the world but more than half of their sales were in the US last quarter.
    31 May 2014, 12:48 PM Reply Like
  • sethmcs
    , contributor
    Comments (3347) | Send Message
     
    Nobody ever got fired buying IBM does not apply in China these days.
    30 May 2014, 11:23 PM Reply Like
  • elyse
    , contributor
    Comment (1) | Send Message
     
    I have shares in IBM but the price is still going down should I sell or buy an option?
    31 May 2014, 05:51 AM Reply Like
  • chip825
    , contributor
    Comments (15) | Send Message
     
    I worked for IBM for 34 years.... Dumped all my stock and would not touch it.
    Too old school. Don't get me wrong, they are still a solid company, however, growth prospects are very dim.. Having problems hiring new workers who are not really interested in old school tech.

     

    Continually cutting back on benefits (and people) to make a projected EPS regardless of what it takes or causes.

     

    Revenue continues to decline and EPS will eventually collapse after they can no longer afford stock buybacks and paying dividends.
    1 Jun 2014, 09:40 PM Reply Like
  • dapizz
    , contributor
    Comments (608) | Send Message
     
    It may be better (in my humble opinion) to play IBM by selling puts. While the company obviously needs to reboot the company's strategy to some extent, they're not going to disappear any time soon. With the market being as toppy as it is and the segment in a limbo state of sorts, playing a longer put strategy would be safer and may make you more money. I haven't looked at the options plays though, and am not an investor at this time. Oracle and HPQ seem better positioned for short term and long term growth than IBM right now.
    31 May 2014, 12:29 PM Reply Like
  • DanoX
    , contributor
    Comments (2743) | Send Message
     
    Yea, Amazon, Dell, HP, IBM, and INTEL are going to cleanup in a low margin area.
    1 Jun 2014, 04:41 PM Reply Like
  • TCG,llc
    , contributor
    Comments (335) | Send Message
     
    No matter, how you differentiate these stocks (except Cisco), all are destined to be "shorted"...I had a discussion the other day specifically about HPQ where I cautioned that the company's profits are no more than a manifestation of layoffs which are now more of the business strategy than any new products or services. Any way you look at it...many of the companies within this sector appear to have no clue as to where the market demand is headed...However, as it seems that there's not enough demand for them all and most are absent of a decent size "mobile footprint"...they'd better get onboard soon...
    1 Jun 2014, 05:06 PM Reply Like
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