HP regains server lead but Taiwan vendors see big growth

Taiwanese vendors that sell directly to Google and Facebook collectively had the biggest growth in the quarter

Hewlett-Packard took back its server crown from IBM last quarter as the overall market contracted and Taiwanese vendors made big gains selling directly to Internet giants like Google and Facebook, IDC reported Wednesday.

HP expanded its share of the market only modestly from a year earlier but IBM's portion declined 4.5 points despite solid mainframe sales, to leave HP in the top spot. HP finished the third quarter with 28.1 percent of worldwide server revenue to IBM's 23.4 percent, IDC said.

But the strongest growth was for the "ODM direct" segment which IDC broke out for the first time this quarter. It stands for original design manufacturers, which are Taiwanese firms like Quanta Computer, Wistron Group, Inventec and Compal, which sell partial and fully-built servers to the big cloud providers.

It's a growing segment and one that threatens the incumbents. ODM's accounted for 6.5 percent of server revenue last quarter, up 45.2 percent from a year earlier, IDC said. If the ODM category were a single vendor, it would be the third largest ahead of Dell.

Almost 80 percent of the ODM's server revenue came from the U.S., primarily from sales to Google, Amazon, Facebook and Rackspace.

Overall, the server market declined 3.7 percent from a year earlier to US$12.1 billion. It was the third consecutive quarter of declining revenue but IDC predicts improvement with a refresh cycle early next year. In terms of units shipped, volumes were about flat year over year, meaning average selling prices dropped.

Volume systems -- mostly x86 servers -- picked up slightly from last year, with 3.5 percent revenue growth. But sales of midrange and high-end systems dropped 17.8 percent and 22.5 percent, respectively, IDC said.

IBM fared worst of the top 5 vendors, with revenue down 19.4 percent due to "soft demand for System x and Power Systems," IDC said. Dell retained third place with 16.2 percent of revenue, about flat from last year, while Cisco Systems and Oracle tied for fourth.

Cisco saw the most growth of the top vendors, with a nearly 43 percent revenue jump, IDC said.

(IDC is owned by International Data group, the parent company of IDG News Service.)

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com

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