Research firm Gartner is out this week with their server numbers. What’s fascinating is that IBM passed HP for market lead in revenue but is well behind HP in terms of shipments, suggesting the companies are largely focused on vastly different product sets.
IBM is more up-market and likely showcasing their traditional success with very large scale servers. HP is much more aggressive with lower cost products.
The missing number is profit, which isn’t broken out and would likely tell which company is executing better as a business. To be clear, the difference in revenue (worldwide numbers) is 29.3% for HP and 29.7% for IBM, which has the firms basically tied.
In volume it’s 12.1% for IBM and 29.2% for HP, which has HP clearly in the lead, with Dell as number 2 at 21.8%.
So what the heck is going on?
HP’s Drama Hit
One thing that’s clear is that HP dropped in both shipments and revenue about 3%, which is likely the impact of the firm’s changes in executive leadership and their on-again/ off-again announcement they were going to spin off their PC division.
This uncertainty gave both Dell and IBM some upside, with Dell growing a whopping 6.3% in revenue 3% in unit volume, suggesting they grew share in a richer segment than they typically occupy. (Revenue went up twice what volume increased).
IBM’s volume, on the other hand, was flat and they grew revenue 3%, which suggests that HP just wasn’t as effective a competitor during this time. In short, IBM didn’t sell any more -- they just were under less price pressure from HP as a result of HP being crippled.
Both Dell and IBM should show bottom line improvement in these segments when they report year end results, if these numbers hold up.
In short, the uncertainty around HP benefited Dell the most but gave IBM the critical revenue top spot.
Given that Oracle caused much of this drama you would expect some Oracle benefit. Oracle was flat on revenue growth and apparently didn’t make enough unit volume to get out of the “other” category there. That’s kind of a sad tale for what used to be Sun.
So with all of that HP pounding they did, revenue remained flat. And given the other category grew sharply (23%) there is at least the suggestion that Oracle may have had to discount sharply to hold the revenue line flat. This suggests they have increased the unprofitability of their Sun unit dramatically.
Part of the drama was the breakup of the HP/Oracle partnership. And that it would seem unlikely that a customer already upset at Oracle and having moved from Sun to HP would want to trust Oracle again near term, and so increasingly would need an alternative database solution. This would suggest that IBM got most of this benefit or eventually will.
However, since Dell’s numbers increased more sharply and Oracle has already indicated it was its X86 lines it’s having the most trouble with, it could also suggest that Dell is playing strongly here – and that Oracle software is simply being moved to Dell boxes.
If Oracle’s software revenue continues strong this latter theory would seem the most likely. I expect IBM got some X Series (x86) upside as well. But there isn’t enough detail in what I’ve seen of Gartner’s numbers to break that out.
Surprise Winner: Lenovo
Lenovo was the fastest growing at 77%, though granted that only moved them from 1.2% to 2.0% market share in units and they are still in “other” in revenue. But it makes them the most likely to replace Oracle if Oracle continues to drop in market share at the bottom of the chart, because they are the fastest growing.
The irony here is that IBM’s strategy appears to have helped both IBM and Lenovo, while Oracle’s hostile strategy toward HP has apparently hurt both of those companies. It kind of suggests that being nice sometimes pays dividends.
Wrapping Up: A Christmas Message
Because this report doesn’t show profits we are left to make some assumptions. It does look like HP was hit across the board, and that IBM and Dell got a bit more profitable. Given that“other” revenue grew around 10% faster than the “other” overall category, it looks like Lenovo (which was in the first) increased in profitability, while Oracle (which was in the second) declined. But against Oracle’s vastly stronger software revenue this may be difficult if not impossible to ever break out.
One other thing to walk away with, however, is that drama is expensive and that both Oracle and HP paid the price this last quarter. You could also argue that Dell’s focus on the mid-market is paying off.
However, when looking across at IBM vs. Oracle, it may simply be more profitable to be steady and, well, nice. Now if that isn’t a Christmas message I don’t know what is. No coal for IBM this year.