The global server market isn't the most flashy part of the technology industry, but it is one of the most important sectors in all of tech. Whetherphysical or cloud-based, servers are the backbone of modern computing. Without them, our tech-laden world could not exist.
That's why the companies that make servers can be steady, reliable investments. International Business Machines (NYSE: IBM), Hewlett-Packard Enterprise(NYSE: HPE), and Intel (NASDAQ: INTC)are three prominent names to consider in this space. Let's take a closer look at them.
The shift from physical servers to cloud-computing products is one of the biggest trends in the server market today. It's also the reality for IT giant IBM.
IBM saw its server sales decline 22% from $7.5 billion in 2015 to $5.9 billion in 2016. The company is in the third year of the sales cycle for its z13 mainframe server, and it emphasized that it continued to add server clients in 2016.However, in fiscal 2016 alone, cloud service revenue rose 49%, from roughly $3.9 billion to $5.9 billion,more than compensating for the revenue decline in physical servers.
Of course, selling cloud services involves increasing the number of its own servers in use. It's just that the physical servers are separated from the cloud-computing software, which changes the sales model but not the computing product being delivered. So IBM's revenue model will always be connected to the server market, even as the way it sells its computing power changes along with the rest of the industry in the years to come.
Image source: Getty Images
Servers are the largest revenue driver for Hewlett-Packard Enterprise, the largest server producer by market share. Their sales accounted for $14 billion of its $50.1 billion in total 2016 sales.
Hewlett-Packard Enterprise has so far weathered the changes in the server industry better than expected, as server sales for the IT giant fell just 0.7% in fiscal 2016. However, some of the long-term trends affecting the sector may be catching up with it, as server sales declined 14% year over year, from $3.5 billion to $2.9 billion, inthe most recent quarterly report.
The bigger problem is that the company lacks a dedicated cloud suite of products like IBM does. IBM can hope to hold on to many of its customer relationships by transitioning their solutions from physical servers to cloud computing as a service. Whether Hewlett-Packard Enterprise can figure out a similar solution will be the thing for investors to watch in the coming years.
The world's largest chipmaker rules over the server market; estimates of its share of server market microprocessors hover around 99%.So the company stands a great chance of continuing to print profits from the computing infrastructure space, even as the way computing is delivered changes.
That's great news, because Intel's data-center group, which represents the company's server sales, produced a 43% operating margin in fiscal 2016.This segment has, however, seen its operating margin decline from as high as 50% in 2014, a drop that Intel seems to pin on increased operating expenses.
If that's so, it implies that the company hasn't lost its top-line pricing power. That seems like a possibility, as leading cloud companies such asAmazon.com, Alphabet, and others could seek volume discounts for their server chips. Investors will want to keep an eye on this trend, but there's little doubt that Intel is one the most indispensable companies in the server market today.
10 stocks we like better than IBM
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and IBM wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 5, 2017
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.
Visit link:
The 3 Best Server Companies to Buy in 2017 - Madison.com
- Setting up a Virtual Server on Ninefold - Video [Last Updated On: February 26th, 2012] [Originally Added On: February 26th, 2012]
- ScaleXtreme Automates Cloud-Based Patch Management For Virtual, Physical Servers [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- Secure Cloud Computing Software manages IT resources. [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- Dell unveils new servers, says not a PC company [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- Wyse to Launch Client Infrastructure Management Software as a Service, Enabling Simple and Secure Management of Any ... [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- As the App Culture Builds, Dell Accelerates its Shift to Services with New Line of Servers, Flash Capabilities [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- Terraria - Cloud In A Ballon - Video [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- Ethernet Alliance Interoperability Demo Showcases High-Speed Cloud Connections [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- RSA and Zscaler Teaming Up to Deliver Trusted Access for Cloud Computing [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- [NEC Report from MWC2012] NEC-Cloud-Marketplace - Video [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- IBM SmartCloud Virtualized Server Recovery - Video [Last Updated On: February 28th, 2012] [Originally Added On: February 28th, 2012]
- BeyondTrust Launches PowerBroker Servers Windows Edition [Last Updated On: February 29th, 2012] [Originally Added On: February 29th, 2012]
- Ericsson joins OpenStack cloud infrastructure community [Last Updated On: February 29th, 2012] [Originally Added On: February 29th, 2012]
- ScaleXtreme Cloud-Based Patch Management Open for New Customers [Last Updated On: March 1st, 2012] [Originally Added On: March 1st, 2012]
- RootAxcess - Getting Started - Video [Last Updated On: March 1st, 2012] [Originally Added On: March 1st, 2012]
- How to Create a Terraria Server 1.1.2 (All Links Provided) - Video [Last Updated On: March 1st, 2012] [Originally Added On: March 1st, 2012]
- Dell #1 in Hyperscale Servers (Steve Cumings) - Video [Last Updated On: March 1st, 2012] [Originally Added On: March 1st, 2012]
- Managing SAP on Power Systems with Cloud technologies delivers superior IT economics - Video [Last Updated On: March 1st, 2012] [Originally Added On: March 1st, 2012]
- AMD Acquires Cloud Server Maker SeaMicro for $334M USD [Last Updated On: March 3rd, 2012] [Originally Added On: March 3rd, 2012]
- Web Host 1&1 Provides More Flexibility with Dynamic Cloud Server [Last Updated On: March 3rd, 2012] [Originally Added On: March 3rd, 2012]
- Leap Day brings down Microsoft's Azure cloud service [Last Updated On: March 3rd, 2012] [Originally Added On: March 3rd, 2012]
- RightMobileApps White Label Program - Video [Last Updated On: March 3rd, 2012] [Originally Added On: March 3rd, 2012]
- bzst server ban #2 - Video [Last Updated On: March 3rd, 2012] [Originally Added On: March 3rd, 2012]
- “Cloud storage served from an array would cost $2 a gigabyte” [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- More Flexibility with the 1&1 Dynamic Cloud Server [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- Hub’s future jobs may be in cloud [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- Cloud computing growing jobs, says Microsoft [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- TurnKey Internet Launches WebMatrix, a New Application in Partnership with Microsoft [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- Cebit 2012: SAP Cloud Computing Strategy - Introduction - Video [Last Updated On: March 6th, 2012] [Originally Added On: March 6th, 2012]
- Dome9 Security Launches Industry's First Free Cloud Security for Unlimited Number of Servers [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- Servers Are Refreshed With Intel's New E5 Chips [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- Samsung's AllShare Play pushes pictures from phone to cloud and TV [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- Google drops the price of Cloud Storage service [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- New Intel Server Technology: Powering the Cloud to Handle 15 Billion Connected Devices [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- Swisscom IT Services Launches Cloud Storage Services Powered by CTERA Networks [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- KineticD Releases Suite of Cloud Backup Offerings for SMBs [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- First Look: Samsung Allshare Play - Video [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- Bill The Server Guy Introduces the New Intel XEON e5-2600 (Romley) Server CPU's - Video [Last Updated On: March 7th, 2012] [Originally Added On: March 7th, 2012]
- New Cisco servers have Intel Xeon E5 inside [Last Updated On: March 8th, 2012] [Originally Added On: March 8th, 2012]
- Cisco rolls out UCS servers with Intel Xeon E5 chips [Last Updated On: March 8th, 2012] [Originally Added On: March 8th, 2012]
- From scooters to servers: The best of Launch, Day One [Last Updated On: March 8th, 2012] [Originally Added On: March 8th, 2012]
- Computer Basics: What is the Cloud? - Video [Last Updated On: March 9th, 2012] [Originally Added On: March 9th, 2012]
- Could the digital 'cloud' crash? [Last Updated On: March 10th, 2012] [Originally Added On: March 10th, 2012]
- Dome9 Security Launches Free Cloud Security For Unlimited Number Of Servers [Last Updated On: March 10th, 2012] [Originally Added On: March 10th, 2012]
- Cloud computing 'made in Germany' stirs debate at CeBIT [Last Updated On: March 11th, 2012] [Originally Added On: March 11th, 2012]
- New Key Technology Simplifies Data Encryption in the Cloud [Last Updated On: March 11th, 2012] [Originally Added On: March 11th, 2012]
- Can a private cloud drive energy efficiency in datacentres? [Last Updated On: March 12th, 2012] [Originally Added On: March 12th, 2012]
- Porticor's new key technology simplifies data encryption in the cloud [Last Updated On: March 12th, 2012] [Originally Added On: March 12th, 2012]
- Borders + Gratehouse Adds Three New Clients in Cloud Sector [Last Updated On: March 12th, 2012] [Originally Added On: March 12th, 2012]
- Dell to invest $700 mn in R&D, unveils 12G servers [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- Defiant Kaleidescape To Keep Shipping Movie Servers [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- Data Centre Transformation Master Class 3: Cloud Architecture - Video [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- DotNetNuke Tutorial - Great hosting tool - PowerDNN Control Suite - part 1/3 - Video #310 - Video [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- Cloud Computing - 28/02/12 - Video [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- SYS-CON.tv @ 9th Cloud Expo | Nand Mulchandani, CEO and Co-Founder of ScaleXtreme - Video [Last Updated On: March 13th, 2012] [Originally Added On: March 13th, 2012]
- Oni Launches New Cloud Services for Enterprises Using CA Technologies Cloud Platform [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- SmartStyle Advanced Technology - Video [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- SmartStyle Infrastructure - Video [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- The Hidden Risk of a Meltdown in the Cloud [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- FireHost Launches Secure Cloud Data Center in Phoenix, Arizona [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- Panda Security Launches New Channel Partner Recruitment Campaign: "Security to the Power of the Cloud" [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- NetSTAR, Inc. Announces Safe and Secure Web Browsers for iPhones, iPads, and Android Devices [Last Updated On: March 14th, 2012] [Originally Added On: March 14th, 2012]
- Amazon Cloud Powered by 'Almost 500,000 Servers' [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- NetSTAR Announces Secure Web Browsers For iPhones, iPads, And Android Devices [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Be Prepared For When the Cloud Really Fails [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Dr. Cloud explains dinCloud's hosted virtual server solution - Video [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- New estimate pegs Amazon's cloud at nearly half a million servers [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Amazon’s Web Services Uses 450K Servers [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Saving File On Internet - Cloud Computing - Video [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- DotNetNuke Tutorial - Great hosting tool - PowerDNN Control Suite - part 2/3 - Video #311 - Video [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Linux servers keep growing, Windows & Unix keep shrinking [Last Updated On: March 15th, 2012] [Originally Added On: March 15th, 2012]
- Cloud Desktop from Compute Blocks - Video [Last Updated On: March 16th, 2012] [Originally Added On: March 16th, 2012]
- Amazon EC2 cloud is made up of almost half-a-million Linux servers [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- HP trots out new line of “self-sufficient” servers [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- Cloud Web Hosting Reviews - Australian Cloud Hosting Providers - Video [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- Using Porticor to protect data in a snapshot scenario in AWS - Video [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- CDW - Charles Barkley - New Office - Video [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- Nearly a Half Million Servers May Power Amazon Cloud [Last Updated On: March 17th, 2012] [Originally Added On: March 17th, 2012]
- Morphlabs CEO Winston Damarillo talks about their mCloud Rack - Video [Last Updated On: March 20th, 2012] [Originally Added On: March 20th, 2012]
- AMD reaches for the cloud with new server chips [Last Updated On: March 20th, 2012] [Originally Added On: March 20th, 2012]