The bad news keeps coming for Lenovo.

Lenovo’s stock is falling, and here are some of the reasons:

  • Google is dumping shares at a discount.
  • Analysts have written down the company.
  • Smartphone sales are plunging
  • And for the first time in six years Lenovo lost money.
  • Plus, an analyst says Lenovo is having trouble adjusting to the new data center business environment.

Now comes more bad news: Server revenue plunged 10 percent in the first quarter.

The latest server report from research firm Gartner show that Lenovo’s server business, which is headquartered in the Triangle, shipped 9.6 percent fewer x86 servers year-over-year.

Revenue, meanwhile, fell 10.2 percent.

Another research firm, IDC, reported similar numbers.

Lenovo is trying to right the server ship, recently announcing a new partnership with Nutanix which focuses on hyperconvergence. (Definition: “A type of infrastructure system with a software-centric architecture that tightly integrates compute, storage, networking and virtualization resources and other technologies from scratch in a commodity hardware box supported by a single vendor” – TechTarget.)

That move makes sense as Gartner noted one bright spot in the server business:

“The real driver of global growth continues to be the hyperscale data center segment. The enterprise and small or midsize business (SMB) segments remain relatively flat as end users in these segments accommodated their increased application requirements through virtualization and considered cloud alternatives.”

Lenovo bought IBM’s x86 business two years ago, seeking to vault to the top of global server sales. And the company,. which operates one of its two global headquarters in Morrisville, still ranks No. 3 in the lower-cost x86 server segment. But Lenovo is a long way behind market leaders HPE and Dell.

And just as in PCs, Lenovo is competing in a market where sales are declining. At least in the computer market, Lenovo is gaining market share (especially in the U.S.) But in servers, it’s a different story.

In discussing earnings last week, Lenovo said that it believed sales force changes would boost the server business.

At least Lenovo isn’t alone in fighting a shrinking market as more enterprises shift to cloud computing and virtualization, thus creating less demand for hardware.

Overall server sales fell 3.6 percent to $12.4 billion in the first quarter and shipments declined 3 percent, reports IDC.

“As expected, server growth slowed in the first quarter, with a clear end to the Intel-led enterprise refresh, a pause in hyperscale cloud expansion, and a very difficult year-on-year comparison in the high end of the market, coming off of a major mainframe refresh from IBM one year ago,” said Kuba Stolarski, Research Director, Computing Platforms at IDC, in the new report.

“Now that the cyclical refresh has comes to an end, the market focus is shifting towards software-defined infrastructure, hybrid environment management, and next-gen IT domains such as the Internet of Things (IoT), robotics, and cognitive analytics. In the short term, IDC expects the second half of 2016 to re-energize hyperscale cloud infrastructure expansion with existing datacenters filling out and new cloud datacenters standing up across the globe.”

Added Jeffrey Hewitt, research vice president at Gartner: “The drop in revenues in light of shipment increases demonstrates that the servers that shipped during the period had lower average selling prices than those that shipped in the same time frame last year. “

Market leader HPE and No. 2 Dell also made fewer sales while No. 4 Huawei surged 34 percent and No. 5 Inspur grew 19 percent, Gartner noted.

IBM takes hit, too

IBM remains in the high-end server business, and it took a major hit in sales just as other other server players.

Big Blue’s market share of the overall server market fell to 9.2 percent from 13 percent and sales plunged 33 percent to $1.1 billion from $1.7 billion.