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01 Mar 2017

Worldwide Server Market Revenue Declines 4.6% in the Fourth Quarter Amid Continued Softened Enterprise Demand, According to IDC

FRAMINGHAM, Mass., March 1, 2017 – According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, vendor revenue in the worldwide server market declined 4.6% year over year to $14.6 billion in the fourth quarter of 2016 (4Q16). Overall server market growth has recently slowed in part due to a slowdown in hyperscale datacenter growth and continued drag from declining high-end server sales. In addition, the robust enterprise refresh cycle of 2015 has created difficult comparisons in 2016 to the prior year's quarterly results. Worldwide server shipments decreased 3.5% to 2.55 million units in 4Q16 when compared with the same year-ago period.

On a year-over-year basis, volume and midrange system revenue decreased 3.3% and 6.1% in 4Q16 to $11.2 billion and $1.4 billion, respectively. Server demand across enterprise portfolios continued to be soft for the quarter. Meanwhile, 4Q16 demand for high-end systems experienced a year-over-year revenue decline of 10.7% to $2.0 billion. IDC expects continued long-term secular declines in high-end system revenue.

"The server market suffered another difficult quarter as most segments declined, including hyperscale deployments, suggesting that the weakness previously seen is more systemic," said Kuba Stolarski, research director, Computing Platforms at IDC. "Some public cloud datacenter deployments are being delayed and there are indications that overall levels of deployment and refresh may slow down even through the long term as hyperscalers continue to evaluate their hardware provisioning criteria. On the enterprise side, we are seeing ongoing weakness as companies struggle to decide whether to deploy workloads on premises or off, and continue to consolidate existing workloads on fewer servers."

Overall Server Market Standings, by Vendor Group

Hewlett Packard Enterprise (HPE)/New H3C Group retained the number 1 spot in the worldwide server market with 23.6% market share in vendor revenue for 4Q16, as revenue decreased 12.2% year over year to $3.5 billion. The share and year-over-year growth rate includes revenues from the HPE's joint venture with H3C in China that began in May of 2016; as a result, the reported HPE/New H3C Group combines server revenue for both companies globally. Dell Technologies maintained its number 2 position in the worldwide server market with 17.6% of vendor revenue for the quarter, while revenue increased 0.1% year over year to $2.6 billion. IBM regained its third spot, controlling 12.3% of the market even while vendor revenue declined 17.1% year over year. Lenovo and Cisco remained tied* in 4Q16 and together dropped to the fourth market position with 6.5%, and 6.3% revenue share, respectively. Lenovo's revenue declined 16.7% to $947 million, while Cisco declined 1.3% to $916 million. For the first time since IDC began tracking the ODM Direct group of vendors in 2013, the revenue attributed to this group has declined year over year by 7.1% to 1.2 billion. Dell Technologies and HPE/New H3C Group were statistically tied for first place in overall unit shipments, with 20.9% and 20.4% share, respectively.

Top 5 Vendor Groups, Worldwide Server Systems Vendor Revenue, Market Share, and Growth, Fourth Quarter of 2016 (Revenues are in Millions)

Vendor

4Q16 Revenue

4Q16 Market Share

4Q15 Revenue

4Q15 Market Share

4Q16/4Q15 Revenue Growth

1. HPE/New H3C Group**

$3,454.1

23.6%

$3,932.2

25.7%

-12.2%

2. Dell Technologies

$2,577.9

17.6%

$2,576.1

16.8%

0.1%

3. IBM

$1,791.9

12.3%

$2,162.4

14.1%

-17.1%

4. Lenovo*

$946.8

6.5%

$1,136.2

7.4%

-16.7%

4. Cisco*

$916.1

6.3%

$927.9

6.1%

-1.3%

ODM Direct

$1,154.1

7.9%

$1,242.0

8.1%

-7.1%

Others

$3,772.2

25.8%

$3,344.9

21.8%

12.8%

Total

$14,613.1

100%

$15,321.7

100%

-4.6%

IDC's Worldwide Quarterly Server Tracker, March 1 2017

* Note: IDC declares a statistical tie in the worldwide server market when there is a difference of one percent or less in the vendor revenue shares among two or more vendors.

**Note: Due to the existing joint venture between HPE and the New H3C Group, IDC will be reporting external market share on a global level for HPE as "HPE/New H3C Group" starting from 2Q 2016 and going forward.



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"Other than Dell, which remained relatively flat, all top worldwide vendors experienced global revenue declines year over year," said Lloyd Cohen, research director, Computing Platforms at IDC. "Just outside of the top 5, Huawei, ranked number six, grew 73.6% year over year. On a positive note for the overall market, average system values increased 9.0% sequentially, growing in all three server classes: volume servers, midrange enterprise and high-end enterprise, as users are increasing their storage and memory capabilities, driven by workload requirements for key workloads like data analytics."

Top Server Market Findings

Regionally, Asia/Pacific (excluding Japan)(APeJ) and Japan experienced the only positive revenue growth with 4Q16 year-over-year increases of 8.1% and 3.3%, respectively. These were the same two regions that experienced the only positive growth in 3Q16 as well. Within APeJ, China drove overall growth by increasing its revenue 18.8% to $2.7 billion. All other regions continued to decline. Latin America experienced a relatively small decline of 1.1%. The United States declined 7.6% year over year. Europe, the Middle East and Africa (EMEA) declined 12.9%, with all sub-regions in decline: Central and Eastern Europe (CEE) declined 25.0%, Western Europe declined 11.8%, and Middle East and Africa (MEA) declined 7.5%. Canada declined by 15.1% year over year. Of all regions, the U.S. remains the largest regional market with 39.2% of worldwide server vendor revenue.

Demand for x86 servers weakened in 4Q16 with revenues decreasing 1.9% year over year in the quarter to $12.2 billion worldwide, while unit shipments decreased 3.3% to 2.53 million servers. x86 average selling prices (ASPs) increased by 1.5% year over year and 2.4% sequentially. HPE/New H3C Group led the x86 server market with 26.5% revenue share based on a year-over-year decline of 13.0% in x86 revenue. Dell Technologies retained second place, securing 21.1% revenue share following a 0.1% year-over-year revenue increase. Dell Technologies and HPE/New H3C Group were statistically tied for first place in x86 unit share in 4Q16 with 21.0% and 20.5%, respectively.

Non-x86 servers experienced a revenue decline of 16.7% year over year to $2.4 billion, representing 16.2% of quarterly server revenue. IBM leads the segment with 75.4% revenue share despite a 17.1% year-over-year revenue decline. IDC also continued to track minimal revenue from ARM-based server sales in 4Q16; ARM sales have yet to make an impact on the server market.

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for ISS (initial server shipment) and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly unit shipments and revenues (both vendor revenue and value of shipments), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Lidice Fernandez at 305-351-3051 or lfernandez@idc.com.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly-owned subsidiary of IDG, the world's leading technology media, data, and marketing services company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC.

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For more information, contact:

Michael Shirer
press@idc.com
508-935-4200

Jorge Vela
jvela@idc.com
508-935-4313

Lloyd Cohen
lcohen@idc.com
508-935-4333

Lidice Fernandez
lfernandez@idc.com
305-351-3057

Kuba Stolarski
kstolarski@idc.com
508-935-4172