Channelnomics

Channel Helps Dell Defy Server Market Slide

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Dell Inc. did something remarkable last quarter: It posted a 9 percent increase in server sales while the rest of the industry saw modest declines. Overall, Dell and Cisco Systems Inc. lifted server shipment trend lines out of the red.

The secret weapon: The channel.

Analysts credit Dell’s jump in server market share from 21.8 percent to 23 percent to the expanded market activity and sales of its legions of channel partners. By comparison, server rival and market share leader Hewlett-Packard Co. saw its wedge of the pie shrink from 29.2 percent to 25.8 percent, as sales slumped 8.4 percent, according to analyst firm Gartner.

Around the rest of the industry, server unit sales declined for IBM (down 2.5 percent) and Fujitsu (down 3.7 percent). Cisco posted an impressive 40.4 percent increase in server shipments, but it’s working from a substantially smaller base than other leading vendors.

Gartner credits Dell’s engagement with its growing and increasingly focused channel partners and evolving enterprise strategy for pushing entry-level and midrange servers to market. While Dell’s PC sales slide, it’s been using servers, storage and an expanding portfolio of complementary network and software assets to offset losses.

Recognition of Dell’s channel as the catalyst for server growth shouldn’t come as a surprise. Dell long ago turned the corner of “the direct-sales enemy” of the channel to “channel-centric” enabler of solution providers. While many solution providers continue to harbor misgivings and suspicions about Dell and its channel relationships, the company has steadily increased its channel presence and sell-through to the point at which more than one-third of its global sales flows through partners.

While Dell and Oracle lifted overall server unit shipments, they weren’t able to reverse the slide in revenues derived from server sales.

Overall worldwide server sales revenues fell 2.8 percent, with Fujitsu leading the way with an 18.3 percent decline. Oracle saw its server revenues fall 22.5 percent, and HP took a 12.4 percent hit.  Only Dell saw server revenues increase, 10.3 percent over the same quarter the year before.

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