The workstation industry expected more out of fourth-quarter market results than it ended up getting.
After encouraging third-quarter results that seemed to break the market out of its recent stagnation, it looked like the clouds were beginning to clear. However, rather than basking in a mostly sunny fourth quarter, vendors instead again weathered partly cloudy conditions. All told, workstation vendors shipped about 934,000 branded workstations, essentially flat from the third quarter's 932,300. And considering that Q4 is typically cyclically stronger than Q3, flat isn't great.
Still, while numbers on the surface weren't much to cheer about, a deeper look at the results show a market that appears to be settling into a healthier, sustainable growth pattern. "In the carnage that we saw - in late 2008, all of 2009, and into 2010 - workstation replacement cycles slowed dramatically, as wallets snapped shut," explains JPR analyst and "Workstation Report" author Alex Herrera. "In late 2010 and 2011, businesses regained some confidence to spend, and workstation replacements accelerated beyond normal rates to peak in Q3 2011, with buyers, in effect, 'catching up' after holding off during the recession."
"Now, an overheated replacement cycle is going to fall back to typical rates at some point, as machines overdue for replacement get their upgrades. That appears to be what was happening during 2012, causing a flattening in market growth, even as overall macroeconomic conditions continued to improve. Accordingly, we should expect quarters in 2013 to again start showing positive - and more sustainable - growth year-over-year."
Workstation market leaders have played quite consistent roles over the past two years: HP holds steady with its leading market share, Dell's share slides, Lenovo's share gains, and Fujitsu holds steady, in a distant minority position. That trend held in Q4'12, with two exceptions.
First, Lenovo broke a seven-quarter long streak of quarterly share gains, declining modestly to 12.9%. And second, climbing to 42.8%, HP resumed its market gains, gains that had stalled since the first quarter of 2011. Shipping 42.8% of workstation units in Q4'12, HP appears back on smoother ground, after working through the bumps in the road that came with highly questionable (and well-documented) decisions and strategy from previous senior management.
The related market for professional graphics hardware had been experiencing similar quarterly results as the workstation market. The professional graphics market slowed each of the four quarters following Q3'11, finally snapping that string of losses with a 7.5% sequential gain last quarter. Leader Nvidia continues to reap the bulk of the market's rewards, nudging its market share up to 81.7%, with number two AMD at 17.7%.
Potential Perturbations
Going forward the workstation market, like the PC, is waiting to see what impact Dell's going private will have. Will the company still be able to invest in the R&D necessary to stay competitive. Will the company disclose its results?
"We think Dell is the dark horse in this game," said Dr. Jon Peddie, President of JPR. "Once the leader, its share has shrunk and its customer base declined due to lack of attention to the market. Going private could remove the distractions of having to answer to Wall Street every 90 days and let management concentrate on the issues of gaining market share and consumer confidence."