Bad news for IBM and Lenovo: Big Blue server sales plunge
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On The Web
Research Triangle Park, N.C. — Tech news site CNET says a quarter of IBM's Systems Technology Group, which has a large presence in the Triangle, could be laid off in the job cuts that started Thursday. But they only cite one unnamed source. So who knows beyond CNET and the source if the number is accurate?
IBM (NYSE: IBM) has confirmed a "resource action" is underway yet doesn't discuss numbers and is disclosing even less information about this round of cuts by striking from layoff documentation the ages and numbers of people cut in various work groups.
However, there is some hard data that indicates why IBM's System Technology Group (read: hardware) is being hit.
New data from research firm IDC says IBM's server sales and market share plunged in the fourth quarter and for all of 2013.
All the bad news triggers a big question:
What exactly is Lenovo buying for $2.3 billion dollars?
Lenovo is planning to buy IBM's x86 server business, and some 2,000 people in RTP are expecting to transfer to the world's No. 1 PC maker.
And HP (now No. 1 in servers) is vowing to exploit "instability" in the server business as a result of the IBM-Lenovo deals. So said CEO Meg Whitman just last week.
Granted, IBM sells multiple variety of servers, with x86 on the low end. So the bad news can be spread.
The IDC sales report doesn't paint a rosy picture for IBM-Lenovo:
- IBM server sales plunged 19 percent in 2013 to $12.746 billion.
- At the same time its market share fell to 25.6 percent from 30.3 percent.
- HP is now No. 1 in servers at 26.6 percent market share even though its revenues fell 6 percent.
Yes, indeed, the server business is brutal.
In the fourth quarter, IDC reports:
- IBM revenue slumped 28.5 percent from a year earlier to $3.8 billion
- Market share plummeted to 26.8 percent from 35.9 percent
The Good News for Lenovo
The IDC report did include a nugget of good news for Lenovo - the x86 business is actually growing despite IBM's woes.
"Demand for x86 servers continued to improve in 4Q13, with revenues growing 7.8% in the quarter to $10.7 billion worldwide with unit shipments up 8.6% year over year to 2.5 million servers.
"HP led the market with 32.2% revenue share based on 8.9% revenue growth while gaining 0.3 points of share when compared to 4Q12.
"Dell retained second place, securing 19.2% revenue share following a -2.4% year-over-year revenue decline while losing 2.0 points of share when compared with the fourth quarter of 2012.
"IBM rounded out the top three x86 server positions, holding 12.7% revenue share following a -15.9% year-over-year factory revenue decline."
So the market is growing. Lenovo will just have to work the same magic it did in buying IBM's struggling PC business. Nearly nine years later, Lenovo turned that deal into the world's best-selling PC brand.
That is, tif the deal is approved by regulators.
By the way, the report does have good news for Red Hat and Linux servers as well.
WRAL Local Tech Wire Publisher and Editor Rick Smith dishes out tidbits from the local technology sector. Read more articles…
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