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Server market revenue down 4.4% in Q4

Taiwanese makers of servers continue to see robust growth

By Michael Kan
February 27, 2014 02:15 AM ET

IDG News Service - Even as server shipments went up, revenue in the market declined in last year's fourth quarter, as demand for higher-end systems remained weak, according to research firm IDC.

During the period, server revenue decreased by 4.4 percent to $14.2 billion. This marked the fourth consecutive quarter the server market has shown a year-over-year decline.

Although server shipments increased 8.2 percent to 2.5 million units, the growth came from lower-end x86 "volume systems."  In contrast, middle and high-end systems saw sharp drops in revenue.

Server demand, however, could pick up in the first quarter, when a refresh cycle is expected to begin, IDC said on Thursday. To tap the market, vendors will have to focus on building systems geared toward serving the mobile Internet, social networking and cloud computing, the research firm added.

In the fourth quarter, Hewlett-Packard held a statistical tie with IBM for the position of top server vendor by revenue. In server market revenue, HP had a 26.9 percent share, just a 0.1 percentage point ahead of IBM. HP had a 5.7 percent year-over-year growth, while IBM witnessed the biggest drop among the top vendors, down by 28.5 percent on diminishing demand across its server products.

But like in the previous quarter, the biggest growth came from the "ODM Direct" segment, a grouping of emerging server vendors. These original design manufacturers are made up of Taiwanese firms such as Compal, Inventec and Quanta Computer that are selling systems directly to major cloud providers such as Amazon and Google.

During the quarter, the ODM Direct segment grabbed a 6.4 percent share, with a 47.3 percent year-over-year growth. The market share was high enough to rank this segment in the fourth place, behind Dell which had a 14.5 percent share.

Growth in the ODM segment will help the server market recover and push it closer to making up for sales lost in high-end systems, IDC added.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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