Virtualisation puts dent in HPE, Dell and Lenovo's server numbers

Cisco the only top-five server vendor to grow in Q3 as end users add more VMs on existing boxes

Cisco was the only top-five server manufacturer to grow in Q3 as end users continued to add virtual machines on existing boxes, rather than buying new ones, according to Gartner.

Global server revenues sank 5.8 per cent year on year in the three months to 31 October 2016, with market leader HPE suffering an 11.8 per cent decline and closest rival Dell enduring a 7.9 per cent fall, according to the analyst.

"The server market was impacted during the third quarter of 2016 by generally conservative spending plans globally," said Jeffrey Hewitt, research vice president at Gartner.

"This was compounded by the ability of end users to leverage additional virtual machines on existing x86 servers (without new hardware) to meet their server application needs."

Despite having only entered the market in 2010, Cisco is now the world's fourth-largest server manufacturer after bucking the downward trend and growing revenues five per cent during the quarter.

The networking giant is now hot on the heels of third-placed Lenovo, whose sales fell 6.7 per cent, and above IBM, where revenues fell 33 per cent.

"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," added Hewitt.

EMEA suffered a third consecutive quarter of declining server revenues, Gartner said, with the Q3 total down 9.7 per cent year on year.

HPE remained the EMEA market leader by revenue, but lost nearly two percentage points of share as its sales fell 16.4 per cent. Dell, Lenovo and IBM also all fell double digits in the region, with only Cisco bucking that trend with a decline of -0.9 per cent.

"This is not a sudden slowdown following the UK referendum result, it is a sign of continuing weak demand across the EMEA market with very few drivers having a positive effect," said Adrian O'Connell, research director at Gartner.

"With non-x86 servers falling to less than 12 per cent of overall revenue, the market is highly exposed to the negative effects that virtualisation and external cloud services can have on lower-cost x86 platforms. EMEA is likely to remain a very challenging region for server vendors."