FRAMINGHAM, MA – Vendor revenue in the worldwide server market declined 4.6% year-over-year to $14.6 billion in the fourth quarter, according to a new report.

Overall server market growth has recently slowed in part due to a slowdown in hyperscale datacenter growth and continued drag from declining high-end server sales, added IDC, which tracks the data. In addition, the robust enterprise refresh cycle of 2015 has created difficult comparisons in 2016 to the prior year's quarterly results. Worldwide server shipments decreased 3.5% to 2.55 million units when compared with the same year-ago period.

On a year-over-year basis, volume and midrange system revenue decreased 3.3% and 6.1% in 4Q16 to $11.2 billion and $1.4 billion, respectively. Server demand across enterprise portfolios continued to be soft for the quarter. Meanwhile, demand for high-end systems experienced a year-over-year revenue decline of 10.7% to $2 billion. IDC expects continued long-term secular declines in high-end system revenue.

"The server market suffered another difficult quarter as most segments declined, including hyperscale deployments, suggesting that the weakness previously seen is more systemic," said Kuba Stolarski, research director, Computing Platforms at IDC. "Some public cloud datacenter deployments are being delayed and there are indications that overall levels of deployment and refresh may slow down even through the long term as hyperscalers continue to evaluate their hardware provisioning criteria. On the enterprise side, we are seeing ongoing weakness as companies struggle to decide whether to deploy workloads on premises or off, and continue to consolidate existing workloads on fewer servers."

Overall Server Market Standings, by Vendor Group

Hewlett Packard retained the no. 1 spot in the worldwide server market with 23.6% market share in vendor revenue as revenue decreased 12.2% year over year to $3.5 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 stayed in second with 17.6% of vendor revenue for the quarter, while revenue increased 0.1% year-over-year to $2.6 billion. IBM regained its third spot, controlling 12.3% of the market even while vendor revenue declined 17.1% year over year. Lenovo and Cisco remained tied* in 4Q16 and together dropped to the fourth market position with 6.5%, and 6.3% revenue share, respectively. Lenovo's revenue declined 16.7% to $947 million, while Cisco declined 1.3% to $916 million.

For the first time since IDC began tracking the ODM Direct group of vendors in 2013, the revenue attributed to this group has declined year-over-year, dropping 7.1% to 1.2 billion. Dell Technologies and HPE were statistically tied for first place in overall unit shipments, with 20.9% and 20.4% share, respectively.

* Note: IDC declares a statistical tie in the worldwide server market when there is a difference of one percent or less in the vendor revenue shares among two or more vendors.

**Note: Due to the existing joint venture between HPE and the New H3C Group, IDC will be reporting external market share on a global level for HPE as "HPE/New H3C Group" starting from 2Q 2016 and going forward.