8 Key Points From Gartner's Q4 Server Market Report

Waiting For The Tide To Come In

A server market that saw growth among hyper-scale users while struggling with traditional enterprise customers looking to virtualization and cloud services drew a clear line between market winners and losers in the fourth quarter, according to stats published by research firm Gartner Thursday.

While Dell EMC and Huawei made gains, perennial server market powerhouse Hewlett Packard Enterprise and China-based PC giant Lenovo suffered steep declines in revenue and shipments as 2016 drew to a close. HPE's declines meant that Dell EMC closed in on the market leader in fourth-quarter server revenue and put distance between itself and second-place HPE in units shipped during the period.

A flat market means hardware vendors have to fight for scraps of share. Hyper-converged systems have given the x86 server market a boost, but hyper-converged systems make up only a small part of the overall infrastructure hardware market, Gartner noted.

Gartner predicts that the server market will see modest growth this year driven by service provider build-outs while purchasing among enterprises slows. Here are eight things to know about the server market right now.

Dell EMC Bests HPE In Shipments To Reclaim No. 1 Spot

Dell EMC reclaimed the lead in worldwide server shipments in the fourth quarter, bumping its total 6.5 percent year over year to 562,029. While Dell EMC was accelerating, HPE was in reverse, experiencing a decline of nearly 20 percent year over year to end the quarter with 504,407 units shipped and a market share of 17.2 percent, down from 21.2 percent a year earlier, according to Gartner.

Huawei Rises To Third In Units Shipped As Lenovo Struggles

Though they ship roughly half as many servers worldwide as Dell EMC and HPE, Huawei and Lenovo are locked in a tight battle behind the two industry giants. In the fourth quarter, however, Huawei, a newcomer to the server market, boosted shipments 64 percent to claim an 8.4 percent market share and take advantage of Lenovo's weakness in the quarter. Lenovo shipped 220,296 units during the period, about 25,000 fewer than Huawei and a 14 percent decline from a year earlier. Its market share for the quarter was 7.5 percent.

HPE's Revenue Lead Shrinks

Based on revenue, HPE led the worldwide server market in the fourth quarter with $3.4 billion in revenue. That total represents an 11 percent decline compared to the same period a year prior. HPE's server revenue market share was 22.9 percent, down from 25.2 percent a year ago.

Dell EMC Ekes Out Revenue Growth, Closes In On HPE

Dell was one of only two vendors to book revenue growth in the worldwide server market during the fourth quarter, according to Gartner. Dell EMC's revenue finished the quarter at $2.6 billion, which represents growth of about 1.8 percent and increases its market share to 17.4 percent from 16.7 percent a year earlier.

Lenovo Sinks Amid Market's Largest Revenue Decline

The PC giant bought IBM's x86 business about two years ago, but has struggled to formulate a cohesive sales strategy for that line despite the low-cost x86 platform's dominance of the server market. Lenovo's fourth-quarter revenue fell 16.7 percent year over year to $946 million while its revenue market share fell to 6.4 percent from 7.5 percent a year earlier.

Huawei Eating Lenovo's Lunch

Huawei, which began its push into the server market in earnest during 2016, booked about $1.2 billion in server revenue worldwide in the fourth quarter, good for a 7.7 percent market share and a whopping 88 percent increase over the same period the prior year.

IBM Market Share Slips Amid Change In Focus

Big Blue's standing in the server market has shifted since it unloaded its x86 business to Lenovo in order to concentrate on high-end products intended for intensive workloads. The company booked $1.7 billion on server revenue worldwide in the fourth quarter, a 12.2 percent decline, and saw its market share slide to 11.7 percent from 13 percent a year prior.

Flat And Shifting

Overall server revenue dipped 1.9 percent year over year in the fourth quarter while shipments declined 0.6 percent, according to Gartner. For the full year, revenue declined 2.7 percent while shipments grew 0.1 percent. Gartner said that while hyper-scale data centers grew, driving server sales, enterprises grew at a lesser rate as customers shift spending to the cloud and virtualized solutions. Regionally, signs of growth were hard to come by, with the Asia-Pacific region the one market to show growth in both revenue and shipments.