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Virtual machine use softens global server revenues

Virtual machine use softens global server revenues

New research reveals that global server revenues fell by 5.8 per cent in the third quarter of 2016

Enterprises’ use of virtual machines on existing x86 servers has played a part in softening the global server market, with worldwide revenues dropping in the third quarter of 2016, according to Gartner.

The research and analysis firm’s latest figures highlight server revenue reductions in almost all markets around the world, with global revenues falling by 5.8 per cent in the third quarter of 2016, as compared to the same period the previous year.

At the same time, shipments declined 2.6 per cent from the third quarter of 2015, according to Gartner. However, the Asia-Pacific region saw an increase in shipment numbers, recording an eight per cent improvement, year over year, with volume totalling 843,602 units.

Despite the rise in shipments in the local region, revenue in Asia-Pacific for the quarter decreased by 0.1 per cent year-over-year.

All regions showed a decline in shipments, except Eastern Europe, which posted growth of 0.9 per cent. In terms of revenue, all regions except for Japan experienced a decline, with Japan’s quarterly server revenue growing by 1.3 per cent.

In the Australian market, the server market saw a 12.7 per cent year-on-year drop in shipment volumes for the quarter, with most of the top vendors seeing falls, with the exception of Huawei, which recorded a 3244.7 per cent surge in shipments, with 29 units shipped during the quarter in 2015, and 970 units this year.

Likewise, the Australian market saw an 18.6 per cent fall in server revenues for the quarter, compared to the previous year, with HPE seeing the biggest fall among the top vendors, recording a year-on-year drop of 32.5 per cent in the period,

According to Gartner research vice-president, Jeffrey Hewitt, much of the global server market was impacted by conservative spending plans in the quarter, and compounded by the ability of end users to leverage additional virtual machines on existing x86 servers to meet their server application needs.

"Server providers will need to reinvigorate and improve their value propositions to help end users justify server hardware replacements and growth, if they hope to drive the market back into a positive state," Hewitt said.

Among the top five server vendors globally, only Cisco increased revenue in the third quarter, while Huawei and Inspur Electronics saw growth in shipments. HPE, Dell, and Lenovo all experienced declines in both server revenue and shipments.

According to Gartner, x86 server shipments declined by 2.3 per cent, and 1.6 per cent in revenue in the third quarter. All vendors in the top five, except for Cisco, experienced a global decline in revenue. In x86 server shipments, only Huawei and Inspur Electronics experienced growth.

Despite a decline of 11.8 per cent, however, HPE continued to hold its lead in the worldwide server market – based on revenue – with 25.5 per cent market share.

Meanwhile, Dell's market share declined by 7.9 per cent to 17.5 per cent, but it maintained the second spot in the market.

Lenovo secured third spot, with 7.8 per cent of the market, Cisco held the fourth position, while IBM dropped to the fifth position, experiencing the largest decline among the top five vendors.

In the Asia-Pacific region, Lenovo topped the list of vendors, in terms of market share, with 843,602 units shipped, and was followed closely by Dell and Huawei, which came in at second and third respectively.

In terms of revenue, HPE led the pack in Asia-Pacific, clocking up almost $642 million in the quarter. Lenovo came in second, with $594.5 million, and Dell, tallying up $509.4 million in revenue.

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