FRAMINGHAM, MA – Vendor revenue in the worldwide server market declined 4.6% year-over-year to $11.8 billion in the first quarter of 2017, says IDC.

Overall server market growth continues to slow, with most hyperscale service providers waiting until the second half of the year for deployment of Intel's new Skylake processors, the firm says. High-end server sales continue to be a drag on overall market performance.

The market has also been negatively affected by DRAM pricing issues. Worldwide server shipments increased 1.4% year-over-year to 2.21 million units in the first quarter. One customer accounted for more than 10% of the servers shipped.

Volume server revenue declined 3.4% to $9.5 billion, while midrange server revenue grew 16.5% to $1.3 billion. Demand for high-end systems experienced a year-over-year revenue decline of 29% to $1 billion. IDC expects continued long-term secular declines in high-end system revenue.

"The server market continues to struggle to find growth," said Kuba Stolarski, research director, Computing Platforms at IDC. "As the market prepares for the switch to Intel's Skylake this year, we may be witnessing a shift in how workloads are deployed in the future, and what architectural choices will be made around modularity, operating environments, software, and cloud services. As indicated by this quarter's results, one large server customer appears to be betting on a major transition to cloud services, as it alone accounted for approximately a quarter of a million servers deployed in the first quarter."

Hewlett Packard Enterprise (HPE) retained the number one spot in the worldwide server market, with 24.2% market share in the first quarter, as revenue decreased 15.8% year-over-year to $2.9 billion. HPE's share and year-over-year growth rate includes revenues from the H3C joint venture 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 maintained its number two position in the worldwide server market, with 20.1% of vendor revenue and 4.7% year-over-year growth to $2.4 billion.

Dell and HPE were statistically tied for first place in overall unit share, with 21% and 20.8% of worldwide server shipments, respectively.

Cisco, IBM, and Lenovo were statistically tied for the third market position. Cisco had 7% share, with revenue declining 3% year-over-year to $825 million. IBM had 6.3% share, with revenue declining 34.7% to $745 million. Lenovo had 6.2% share, with revenue declining 16.5% to $727 million.

The ODM Direct group of vendors grew revenue 41.8% to $1.2 billion.

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