Networking company Hewlett Packard Enterprise (HPE) is losing server business from software giant Microsoft, Bloomberg News Agency reported on Thursday.
HPE CEO Meg Whitman said last week that her company saw significantly lower demand from a tier 1 customer. HPE did not reveal the name of the customer. Tier-1 service providers are typically major cloud and telecom companies.
There is no official confirmation from HPE.
Research firm Gartner reported that HPE’s server revenue fell 11 percent to $3.4 billion in the fourth quarter of 2016 for a total share of 22.9 percent worldwide. Dell and Huawei, two main rivals of HPE, have achieved revenue growth for the quarter. Dell’ server revenue grew 1.8 percent. Huawei’s server revenue rose 88.4 percent.
Bloomberg reported that the softer demand came from Microsoft as it competes with Amazon, Google in the public cloud market.
Microsoft is pushing hardware providers to reduce prices to expand its public cloud services more efficiently.
The latest news will be a blow to HPE’s business given that Microsoft is one of the world’s largest users of servers.
HPE recently said its revenue declined 10.4 percent in Q4 2016 to $11.4 billion, reflecting uneven global demand environment.
Meg Whitman had said the company faced many challenges like foreign exchange volatility, tight NAND supply which impacted sales in storage and compute businesses and elevated DRAM pricing, tough market environment for core servers and storage and execution issues in the Enterprise Group business.
Market research firm TBR believes that strategic acquisitions will assist HPE in the reversal of some revenue challenges in key aspects of its Enterprise Group portfolio. “We see opportunity for HPE to use its acquisition of SimpliVity to stabilize its core server revenue,” TBR said.
In addition to quickly gaining access to strategic, niche capabilities, HPE benefits from its large, existing install base, which provides a fertile customer base to which HPE can promote adoption of new solutions.
Globally, server revenue declined 1.9 percent, while shipments fell 0.6 percent in the fourth quarter of 2016, Gartner said. In 2016, server shipments grew 0.1 percent, but server revenue declined 2.7 percent.
“Hyperscale data centers by tech companies such as Facebook, Google grew and, at the same time, drove some significant server replacements. Enterprises grew at a lower rate as they continued to leverage server applications through virtualization and in some cases, service providers in the cloud,” said Jeffrey Hewitt, research vice president at Gartner.
HPE is facing challenges in the IT enterprise business.
Enterprise business of HPE was $6.3 billion (–12 percent) with a 12.7 percent operating margin. HPE said its server revenue dipped 12 percent, storage revenue fell 13 percent and networking revenue dropped 33 percent.
