Super Micro Defies Server Market Odds

"Over the last 20 years we have grown and we, of course, have plans to grow more," Liang said in an interview with CRN.

Liang co-founded Supermicro in 1993 and since then has steered the company to growth quarter after quarter in the cutthroat server market. As other server makers have floundered, Super Micro has flourished. Revenue is up 130 percent from $506 million in 2009 to $1.2 billion in 2013, along with the numbers of servers shipped and its growing employee headcount -- which stands at about 1,600 today.

For Liang and Supermicro, the secret to success has been being in the right place at the right time, said Moor Insights and Strategy's Patrick Moorhead. "Super Micro built a name for itself early on selling extremely reliable hardware priced very competitively," Moorhead said.

Back in the heyday of the Silicon Valley computer boom, Liang grew his company on hard work ethics. He cut his teeth selling components and servers to the likes of eBay and Yahoo. Early profiles of the company said it wasn't uncommon for employees to work six days a week starting at 7 a.m. and leaving at 10 p.m. Liang told The New York Times in a 2008 interview that the company's credo was "every hour is a happy hour, or least every day is a happy day." It served him well. As the computer industry boomed, so did Supermicro.

That early success gave Supermicro momentum and helped it stay afloat during tech downturns. Supermicro went public in 2007, infusing the company with money to grow -- and it did. It opened a 1-million-square-foot manufacturing plant in Taiwan, which was recently expanded to 3 million square feet. In 2010, it opened a system integration and logistics center in the Netherlands. And last month Supermicro paid $30 million for the old 36-square-acre campus of the San Jose Mercury News.

Moorhead said that Supermicro has managed to stay nimble enough to rejigger itself to take advantage of evolving server trends over the years. Today, Supermicro is a hybrid original design manufacturer, branded server maker and builds systems for a confidential list of OEMs. It's a mix that has helped the company succeed where some of its competitors have stumbled.

Liang said about 60 percent of Supermicro's business is attributed to hyperscale. The rest, he said, is component sales and services and support.

"We are nimble. That helps us be quick with design and even quicker to market." From design to ship of a server rack can take as little as one to two weeks, Liang told CRN.

Supermicro's Taiwan manufacturing plant also has been a boon, proving once again that being in the right place at the right time matters. Lower wages and proximity to the booming Asian market for servers has served the company well, Moorhead said. As server sales have skyrocketed in China, Supermicro's Taiwan manufacturing facility's proximity to the country has helped it win sales.

As Supermicro has grown to be a $1 billion company, Liang does his best to run the company as a family-owned business. Liang's wife, Chiu-Chu Liu, known as Sara, is the company's co-founder and has been its vice president of operations and treasurer since 1993.

But, Super Micro has its challenges.

Year over year, Supermicro has seen its bottom line shrink from $29.9 million to $21.3 million, despite an increase in revenue from $1 billion to $1.2 billion in 2013. Moorhead said that Supermicro is cutting its margins to the bone to grow market share.

Cutting margins to save market share is not uncommon. That's something that Dell has said is part of its playbook to win lucrative security, storage and cloud services business. But where Dell uses hardware as a springboard to sell services, Supermicro's services offerings are limited.

"Right now Supermicro is riding the hyperscale wave and is benefiting enormously from its ties to China," Moorhead said. "But if it wants to grow up the food chain it's going to have to add to its IT portfolio with some original services companies can't get anywhere else."

Liang said Supermicro's future includes grabbing more market share. But, he said, so is leveraging its Netherlands' system integration logistics center to take advantage of the European market. Supermicro has been quietly ramping up its systems support network selling service agreements that guarantee four-hour on-site response times so it can deliver "local support" no matter where it does business.

PUBLISHED OCT. 7, 2013