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HP Leads the Fast-Growing x86 Server Market

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x86 server market growth led to overall server market revival

In the previous part of this series, we observed how the overall server systems market underwent a revival after the Microsoft (MSFT) withdrew its support for Windows Server 2003, leading to a server refresh cycle. Here, we’ll discuss the main drivers of this growth. We can break the overall server market down into the three main segments: x86, Unix-based or non-x86, and blade servers.

According to a report by IDC, the improved demand for x86 servers benefited growth in the overall server market. The x86 server market grew by a year-over-year rate of 11.6% in 3Q14 to reach $10.7 billion, while the non-x86 server market declined by 21% to $2.0 billion, as the chart below shows.

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HP leads the x86 and blade server markets

HP (HPQ) led the x86 market with a revenue share of 29%, while Dell came in second in this market with a share of 21% as of 3Q14. IBM (IBM) led the non-x86 server market with a revenue share of 61%. Oracle (ORCL) doesn’t rank among the top players in either the x86 or non-x86 server markets, although it had the opportunity to grow its x86 server business after it acquired Sun Microsystems in 2010. However, Oracle’s hardware business has struggled since its acquisition of Sun.

Blade servers—another server segment, which deals with enterprises’ virtualized and converged environments—increased by 2% to $2.3 billion. Cisco (CSCO) was second only to HP in this market, with a revenue share of 26%. HP commanded a revenue share of 43%, while IBM came third at a 15% revenue share.

To gain diversified exposure to HP, you can invest in the NASDAQ Technology Dividend Index Fund (TDIV). TDIV invests about 2.6% of its holdings in HP.

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