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Server Vendors Gain on Coronavirus-Led Demand for Cloud Services

Anirudha Bhagat
·4 mins read

According to the latest data compiled by the research firm IDC, worldwide server revenues jumped 19.8% year over year to $24 billion in second-quarter 2020, while overall shipment grew 18.4% to 3.2 million units.

IDC noted volume server revenues increased 22.1% year over year to $18.7 billion, while the mid-range server witnessed a decline of 0.4% to $3.3 billion. High-end system revenues reached $1.9 billion, reflecting a rise of 44.1%.

Also, x86 servers retained the growth momentum during the June-end quarter. IDC figured out a 17.4% year-over-year rise in x86 server revenues, reaching $21.6 billion, while revenues from non-x86 servers witnessed an increase of 47.4% to $2.4 billion.

IDC stated that the server market is benefiting from increased investments in data centers as well as the communications infrastructure market, as enterprises are shifting all operations from in-premises to homes amid the coronavirus pandemic. Surge in remote working and network traffic are key catalysts driving the strategic spending.

Computer - Integrated Systems Industry 5YR % Return

Computer - Integrated Systems Industry 5YR % Return
Computer - Integrated Systems Industry 5YR % Return

Computer - Integrated Systems Industry 5YR % Return

How are the Vendors Placed?

With respect to individual server manufacturers, there was a tie between Dell Technologies DELL and Hewlett Packard Enterprise HPE /New H3C Group for the first spot with 17.2% and 16.8% share, respectively. IDC calls it a statistical draw when the gap among vendors is 1% or less.

Revenues of Hewlett Packard edged down 1.8% year over year to $3.58 billion. The company’s market share contracted 330 basis points year on year to 14.9%.

Coming to Dell, revenues dipped 12% year over year to $3.34 billion. Its market share slid to 13.9% from the year-ago quarter’s 18.9%.

Inspur/Inspur Power Systems, a China-based company, held the third position with a 10.5% market share. The company’s server revenues surged 77% to $2.53 billion.

The fourth slot is a draw between Lenovo LNVGY and International Business Machines IBM, generating 6.1% and 6% share of total server revenues each. Lenovo’s revenues climbed 21% year over year to $1.47 billion. Moving on to IBM, the company’s server revenues improved 22% in the second quarter to $1.45 billion.

In terms of volume too, Hewlett Packard and Dell tied for the first spot. Hewlett Packard and Dell ended the second quarter with a market share of 14.3% and 13.6%, respectively. Inspur held the third position with a market share of 11.1%. Lenovo captured the fourth position, with market stakes worth 6.1%. Supermicro and Huawei jointly held the fifth position with 4.8% and 4.4% share, respectively.

What’s Ahead?

The pandemic has changed the way we live and work. As countries are gradually easing restrictions on lockdown to restart economic activities, the risk of the spreading of the virus has significantly flared up. Therefore, working and learning from home, and maintaining social distancing would be the new normal.

As a result, we are going to be tech dependent over the long haul. We would be more active on social media sites such as Facebook, WhatsApp, Instagram groups and other digital platforms to keep in touch with our near and dear ones. Office collaboration tools from Atlassian TEAM and Zoom Communications ZM will become the only way for many of us to work.

This trend will ultimately benefit server vendors, as the need for cloud services that help us work, learn and maintain social contact digitally, will shoot up.

Zacks Rank

While Lenovo carries a Zacks Rank #2 (Buy), Hewlett Packard and Dell carry a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IBM currently holds a Zacks Rank #4 (Sell).

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


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International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
Dell Technologies Inc. (DELL) : Free Stock Analysis Report
 
Lenovo Group Ltd. (LNVGY) : Free Stock Analysis Report
 
Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
 
Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
 
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
 
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