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Coronavirus-Led Demand for Cloud Services Aids Server Vendors
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The coronavirus outbreak has been making a sector-wide impact and the server market is not an exception. Disruptions in global business and economic activities due to the pandemic are having an overall negative impact on server sales.
Nonetheless, the pandemic’s impact has not been as bad as it was predicted for server vendors like Dell Technologies (DELL - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) , Lenovo (LNVGY - Free Report) and International Business Machines (IBM - Free Report) .
Notably, server vendors are anticipated to benefit from continued investments in data centers as well as the communications infrastructure market. Surge in remote working and network traffic are key catalysts driving this strategic spending.
Per Mordor Intelligence data, the enterprise server market is expected to reach $148 billion by 2025 from $74.98 billion in 2019, witnessing a CAGR of 12% during the 2019-2025 period.
Computer - Integrated Systems Industry 5YR % Return
It was earlier being predicted that the global lockdown and social-distancing measures will significantly impact server demand. Vendors witnessed waning server demand from industries that have been hit hard, such as automobile, retail, hospitality, etc. However, the pent-up demand from the cloud-service providing companies has offset the overall impact of the pandemic to some extent.
The work-and-learn-from home necessity is stoking demand for cloud services. Furthermore, the lockdown has increased the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services.
The latest data released by the International Data Corporation (IDC) also shows that the pandemic had a lesser impact on server sales than what was predicted earlier. The research firm, in its Mar 27 report, had projected that the server market revenues would decline 11% year over year in the first quarter of 2020. However, according to its latest data released on Jun 9, global server market revenues dropped just 6%.
In the Mar 27 report, IDC had stated that the demand for IT infrastructure is moving in two different directions. The research firm has noticed declining demand from enterprise customers and an increasing demand from cloud-service providers.
What’s Ahead?
The pandemic has changed the way we live and work. As countries are gradually easing restrictions on lockdown to restart economic activities, the risk of coronavirus spread has significantly flared up. Therefore, working and learning from home, and maintaining social distancing would be the new normal.
As a result, we are going to be tech dependent over the long haul. We would be more active on social media sites such as Facebook, WhatsApp, Instagram groups and other digital platforms to keep in touch with our near and dear ones. Office collaboration tools from Atlassian (TEAM - Free Report) and Zoom Communications (ZM - Free Report) will become the only way for many of us to work.
The trend will ultimately benefit server vendors, as the need for cloud services that help us work, learn and maintain social contact digitally, will shoot up.
As per IDC’s estimates, server sales would return to growth in the second half of 2020. Per the data compiled by the research firm, Dell, a Zacks Rank #3 (Hold) company, was the largest server vendor with a market share of 18.7% in first-quarter 2020. This is followed by Hewlett Packard’s 15.5%, another Zacks Rank #3 stock, and Inspur/Inspur Power Systems’ 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lenovo and IBM tied for the fourth position, with a market share of 5.6% and 4.8%, respectively. Notably, the research firm declares a statistical tie, when the market share difference between two companies is less than 1%. Both Lenovo and IBM currently carry a Zacks Rank #3.
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Image: Bigstock
Coronavirus-Led Demand for Cloud Services Aids Server Vendors
The coronavirus outbreak has been making a sector-wide impact and the server market is not an exception. Disruptions in global business and economic activities due to the pandemic are having an overall negative impact on server sales.
Nonetheless, the pandemic’s impact has not been as bad as it was predicted for server vendors like Dell Technologies (DELL - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) , Lenovo (LNVGY - Free Report) and International Business Machines (IBM - Free Report) .
Notably, server vendors are anticipated to benefit from continued investments in data centers as well as the communications infrastructure market. Surge in remote working and network traffic are key catalysts driving this strategic spending.
Per Mordor Intelligence data, the enterprise server market is expected to reach $148 billion by 2025 from $74.98 billion in 2019, witnessing a CAGR of 12% during the 2019-2025 period.
Computer - Integrated Systems Industry 5YR % Return
Computer - Integrated Systems Industry 5YR % Return
What Offset COVID-19 Impact on Server Sales?
It was earlier being predicted that the global lockdown and social-distancing measures will significantly impact server demand. Vendors witnessed waning server demand from industries that have been hit hard, such as automobile, retail, hospitality, etc. However, the pent-up demand from the cloud-service providing companies has offset the overall impact of the pandemic to some extent.
The work-and-learn-from home necessity is stoking demand for cloud services. Furthermore, the lockdown has increased the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services.
The latest data released by the International Data Corporation (IDC) also shows that the pandemic had a lesser impact on server sales than what was predicted earlier. The research firm, in its Mar 27 report, had projected that the server market revenues would decline 11% year over year in the first quarter of 2020. However, according to its latest data released on Jun 9, global server market revenues dropped just 6%.
In the Mar 27 report, IDC had stated that the demand for IT infrastructure is moving in two different directions. The research firm has noticed declining demand from enterprise customers and an increasing demand from cloud-service providers.
What’s Ahead?
The pandemic has changed the way we live and work. As countries are gradually easing restrictions on lockdown to restart economic activities, the risk of coronavirus spread has significantly flared up. Therefore, working and learning from home, and maintaining social distancing would be the new normal.
As a result, we are going to be tech dependent over the long haul. We would be more active on social media sites such as Facebook, WhatsApp, Instagram groups and other digital platforms to keep in touch with our near and dear ones. Office collaboration tools from Atlassian (TEAM - Free Report) and Zoom Communications (ZM - Free Report) will become the only way for many of us to work.
The trend will ultimately benefit server vendors, as the need for cloud services that help us work, learn and maintain social contact digitally, will shoot up.
As per IDC’s estimates, server sales would return to growth in the second half of 2020. Per the data compiled by the research firm, Dell, a Zacks Rank #3 (Hold) company, was the largest server vendor with a market share of 18.7% in first-quarter 2020. This is followed by Hewlett Packard’s 15.5%, another Zacks Rank #3 stock, and Inspur/Inspur Power Systems’ 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lenovo and IBM tied for the fourth position, with a market share of 5.6% and 4.8%, respectively. Notably, the research firm declares a statistical tie, when the market share difference between two companies is less than 1%. Both Lenovo and IBM currently carry a Zacks Rank #3.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>