Seeking Alpha

Server growth positive in Q2; IBM loses share, H-P/Cisco gain

  • IDC estimates global server sales rose 2.5% Y/Y in Q2 to $12.6B. That marks a turnaround from the 2.2% drop seen in Q1, and the 4.4% drop seen in Q4. Gartner estimates sales grew 2.8%.
  • IDC declares the server market, hurt in recent quarters by system consolidation and a shift in demand towards the white-label gear beloved by Web giants (referred to by IDC as ODM Direct), is seeing "the beginning of a cyclical refresh cycle." It sees the pending launch of Intel's (NASDAQ:INTC) Grantley Xeon CPUs, along with Microsoft's plans to end Windows Server 2003 support, lifting sales into 2015.
  • Sales of x86 servers (mostly Intel-based) rose 7.8% in Q2, and now make up 78% of industry revenue. Non-x86 server sales fell 12.8%.
  • Market leader H-P's (NYSE:HPQ) share rose 40 bps Y/Y to 25.4%, with x86 growth offsetting Itanium weakness. #2 IBM's share fell 340 bps to 23.6% ahead of the sale of its x86 server ops to Lenovo; on the bright side, IBM's decline narrowed from Q1's 600 bps.
  • #3 Dell's share fell 160 bps to 16.2%. #4 Oracle's (NYSE:ORCL) grew 10 bps to 5.9%, with engineered system growth offsetting declines for older UNIX/SPARC server lines. #5 Cisco (NASDAQ:CSCO), which recently proclaimed its UCS server ops are on a $3B/year run rate, saw its share rise 140 bps to 5.8% on the back of 35% growth. Cisco should pass Oracle in a quarter or two.
  • ODM Direct vendors saw their share grow 110 bps to 6.6%. The shares of all other vendors rose 190 bps to 16.1%.
  • Related tickers: SMCI, MLNX, QLGC, ELX
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Comments (7)
  • techy46
    , contributor
    Comments (7491) | Send Message
     
    Really good news for Intel.
    27 Aug 2014, 11:18 PM Reply Like
  • gabi1
    , contributor
    Comments (80) | Send Message
     
    whats bps ?
    28 Aug 2014, 12:20 AM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (2921) | Send Message
     
    gabi,

     

    bps = basis points. 1 basis point is 1/100 of 1%
    28 Aug 2014, 09:14 AM Reply Like
  • brianhutch
    , contributor
    Comments (322) | Send Message
     
    A fatal flaw in investing is "falling in Love with your stocks" that is the only reason why shareholders stubbornly stay IBM shareholders when HPQ at 25% - 30% of IBM's valuation on a price to sales and price to book ratio reduces IBM to second place in the server business .
    Trying to justify IBM on the basis that it will "turn" things around has been a losing proposition for the last 3 years while other stocks have appreciated by 200-300-% IBM has gone nowhere .
    When finally this hot air bubble of the FED's easy money policy collapses as they always do then IBM will crash .
    28 Aug 2014, 01:22 AM Reply Like
  • Brian Babylon
    , contributor
    Comments (81) | Send Message
     
    Gaining marketshare in servers is like gaining marketshare in horseshoes right before the invention of the car.
    28 Aug 2014, 02:19 AM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (2921) | Send Message
     
    Brian,

     

    What do you think is going to replace servers?
    28 Aug 2014, 09:15 AM Reply Like
  • A Lakeman
    , contributor
    Comments (4) | Send Message
     
    Summary:
    I don't think that the ending of support for Windows Server 2003 will provide a significant lift to server sales numbers for Microsoft.

     

    Detail:
    All the enterprises I'm familiar with purchased Server 2012 (and 2012 R2) Datacenter licenses a couple years ago and have already virtualized most server work loads, including Server 2003. Those same sockets and licenses will run the new servers used to replace Server 2003 using current resources, and support natural server growth in a relatively linear fashion without a significant bulge for the ending of Server 2003. (A Windows Server Datacenter license permits the running of unlimited Windows Servers per CPU socket, governed only by available resources on the physical host.)

     

    Part of this difference in behavior from Windows 8 is that since end users don't experience nor care what a server GUI is, IT professionals have been replacing Windows Server 2003 with later versions for several years now. This is significantly different than the business desire to keep the user interface (i.e. the desktop OS) unchanged for years at a time for end users.
    3 Oct 2014, 03:37 AM Reply Like
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