IBM Slides, Dell Gains In Gartner Server Report

InformationWeek Chiefs Of The Year: Where Are They Now?

Sometimes it pays to be in the right place at the right time. That's what x86-based server vendors discovered (yet again) in the third quarter as that market held up and even grew as RISC/Itanium server manufacturers struggled with a continuing slide.

These are among the key trends revealed in Gartner's third-quarter assessment of worldwide server shipments and revenues, a report issued on Wednesday. While x86 server shipments (in units) were up 1.2% and revenues grew 7.4% from the same quarter last year, RISC/Itanium shipments declined 17.1% and revenues were off 8.0%.

Dell and Cisco, the No. 3 and No. 4 vendors, respectively, in revenue-based market share, were the biggest gainers in the quarter, each adding 1.3 points of market share (though Dell is nearly three times larger than Cisco by that measure). Both vendors are focused exclusively on x86 products.

[Want more on IBM's hardware moves? Read IBM Sells Chip Business, Declines Continue.]

IBM and HP were both hit hard by the continuing slide in RISC/Itanium server sales. IBM, the largest vendor in this lucrative, high-end segment, saw shipments decline a whopping 29.0% while revenues declined 8.7%. HP unit shipments were off 9.7% while revenues declined 16.5% from the year-earlier period. Oracle, the second-largest player in this segment, bucked the trend, with RISC shipment and revenue gains of about 2.0%. Oracle's total server revenue was flat.

While tagged as "Unix" servers, RISC-based servers have long since been refocused on Linux workloads. IBM is trying to revive its RISC-based Power Server line with an open source initiative, but it's clearly basing future bets on next-generation technology.

IBM recently paid GlobalFoundries $1.5 billion to take ownership of the New York- and Vermont-based chip manufacturing plants that produce the chips used in Power servers. GlobalFoundries and IBM agreed to a 10-year supply agreement as part of the sale. Meanwhile, IBM remains in the chip design business, continuing a $3 billion investment over five years, announced earlier this year, to develop next-generation chips based on nanotechnologies.

IBM's numbers will drop yet again in fourth quarter having concluded the sale of its x86-based System X server business to Lenovo at the end of September. The divestment also cut into third-quarter shipments of those products by as much as 10%, according to Gartner analyst Errol Rasit.

"Many customers are pausing investment in [these products] as the transition goes through," said Rasit in an email interview with InformationWeek. "There is some natural attrition that will favor other x86 providers."

The shift of business from IBM will likely propel Lenovo into the top five, said Rasit, "but the question is whether Lenovo can sustain IBM’s position through the transition into 2015, or potentially grow market share." Lenovo is focused on growth with the System X business, according to Rasit, suggesting we might see unit shipment gains accompanied by flat, or even declining, revenue.

Getting out of the x86 market might seem counterintuitive for IBM, given that it's the server market that's still growing. But the hardware business in general is viewed as commoditized, and IBM is setting its sights on higher-margin software and services business.

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