Cisco gets boost in server shipments in Q1, Gartner says

Cisco has a minute market presence, but its server shipments grew year over year as top vendors HP, IBM and Dell struggled
  • (IDG News Service)
  • 30 May, 2012 19:24

Worldwide server shipments grew at a slower-than-expected clip during the first quarter of 2012, but Cisco, which has a small market share, beat market trends as top server makers struggled with slow demand and weak economic conditions, research firm Gartner said on Wednesday.

Server shipments worldwide during the first quarter this year were 2.35 million units, growing by just 1.5 percent compared to the same quarter last year, according to Gartner.

The top three server vendors -- Hewlett-Packard, Dell and IBM -- saw declines in shipments. However, server shipments grew for Fujitsu and Cisco, which were in fourth and fifth place, respectively.

Cisco is mainly known as a networking equipment vendor, but it also deals in blade and rack servers with integrated storage and networking hardware. The servers, sold under the Unified Computing and Servers (UCS) product line, bind systems together in data centers.

At 1.7 percent, Cisco's server market share was minuscule during the first quarter this year, but the company's server shipments went up by 70.9 percent year over year to 40,498 units. Fujitsu's server shipments jumped by 12.7 percent to 86,360 units.

Cisco's servers were sold to a small customer base, but the growth was in part due to some effective sales and marketing efforts, said Jeffrey Hewitt, research vice president for Gartner.

"The critical element from which Cisco benefits is their data center penetration level in the network. This provides them a platform from which to push Cisco UCS," Hewitt said.

Server shipments otherwise declined due to a combination of economic and supply chain factors, Hewitt said.

Some customers are holding back for servers based on new processors such as Intel's Xeon E5-2600, which started shipping in March, Hewitt said. The processor upgrade was Intel's first major chip upgrade for standard x86 servers in close to two years, and the chip maker said demand for the chip was strong.

Server shipments were also hurt due to hard-drive supply constraints, a fall-over from previous quarters, Hewitt said. Hard drives have been in short supply due to last year's floods in Thailand, preventing vendors from meeting server demand. Hard-drive shipment issues hurt server shipments in the fourth quarter last year, and Gartner predicted the issue would linger in the first quarter this year.

In addition, weaker-than-expected growth in Asia-Pacific and a soft Western European economy did not help the market, Hewitt said.

Server shipments declined by 0.4 percent for top server maker HP, which sold 685,015 units during the quarter, a 29.2 percent market share. Dell's shipments declined by 1 percent to total 503,450 units, and its market share also dropped to 21.5 percent. IBM's shipments declined by 1.7 percent year over year.

IBM held the top spot over Hewlett-Packard on server revenue, but year over year, revenue for both companies declined. IBM's revenue declined year over year by 7.2 percent to US$3.5 billion, a 28.1 percent market share. HP was in a close second with a 27.8 percent market share on revenue of $3.46 billion, a 9.7 percent decline year over year. Revenue also declined for Dell and Oracle, which held the third and fourth spots, respectively. A surprise was the fifth-placed Fujitsu, whose revenue increased by 4.5 percent.

IBM in a statement said a lot of its revenue contribution came from the Power Systems servers. The systems use Power processors, which are non-x86 server chips typically used in high-end servers. IBM's competitors in the non-x86 server space are Hewlett-Packard, which offers servers based on Intel's Itanium chips, and Oracle, which sells servers based on the SPARC chips.

IBM increased quarterly revenues by 4 percent year over year on Power Systems, the company said. The company also said revenue was bolstered by System x servers, which include standard rack, blade and tower servers with x86 chips.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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