EMEA server revenue declines further

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Not as much brass in iron as there used to be, says IDC

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5 September 2012 | 0

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Factory revenue for servers in the EMEA region was down 11.6% for the second quarter of the year, according to the latest IDC Server Tracker.

Sitting at $3 billion (€2.38 billion), the revenue figure is down on the same period last year despite the 514,311 units shipped only representing a 5.3% fall compared to the same period.

According to the report, the x86 server segment remained the main growth engine, with revenue of $2.2 billion (€1.75 billion), equivalent to 72.2% of the total value market (a slightly lower percentage than the 73.0% recorded the previous quarter). Industry standard servers suffered relatively soft declines in both the value and volume areas, said IDC, down 3.5% and 4.9% respectively year-on-year. The decline in the volume area was a bit deeper than in the previous quarter, when shipments were down 3.2%, indicating higher average selling prices as new products based on latest generation Intel Xeon E5 processors reached the market.

Non-x86 sales "dived well below the $1 billion mark", the analyst reports, and with revenue of $860.3 million (€683 million) were down 27.5% year-on-year.

Despite the double-digit decline, the pace of the slowdown was slightly gentler than in the first quarter of 2012, when the decline reached 28.7% annually. IDC says that this was largely due to a pick-up in demand of RISC Unix in CEE (Central and Eastern Europe), where revenue was up 37.6% annually. 2Q12 was the 14th consecutive quarter in which x86 sales surpassed non-x86 server sales.

"2Q12 marked the third consecutive quarter of annual revenue decline for the overall EMEA server market and the fourth consecutive quarter of revenue decline for the Western European server market, where overall conditions have worsened in relation to 1Q12, due to rising economic uncertainty compounded by major technology transitions underway," said Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA.

The report says that the Western European market continued to reflect the general trend toward x86 servers, which generated sales of $1.6 billion (€1.27 billion), or 72.3% of the total factory revenue in 2Q12 (compared with 65.3% in 2Q11). Non-x86 sales reached less than a third of that amount in 2Q12, at $633.6 million (€503 million), or 27.7% of the total Western European market.

"Western Europe was affected by stronger declines than any other EMEA sub-regions, with server revenue down 15.4% annually, despite growth of 6.9% in CEE and a much softer decline of 4.9% in MEA (Middle East and Africa). The server market is going through a transformation as a result of technological developments accelerating migration to x86, combined with weakening customer demand amidst tougher macroeconomic conditions", said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA. "In Western Europe, with a large installed base of legacy systems and a more mature market than in the emerging economies of EMEA, this trend is more clearly visible. Demand for mainframes was the worst hit in Western Europe in 2Q12, down 36.5% annually and followed by a slowdown of 31.4% in the RISC Unix area."

"In the wake of large HPC installations and a handful of massive public cloud deployments, primarily in Western European countries, density optimised servers showed double digit shipment growth, bucking the market trend," said Giorgio Nebuloni, research manager, Enterprise Server Group, IDC EMEA. "Blade volumes, on the other hand, were down 13% annually to around 80,000 units in 2Q12, as enterprises continued to consolidate and virtualise their blade installed bases, while shying away from larger expansion projects due to economic uncertainty. The theme of convergence and more integrated server, storage, and networking infrastructure is increasingly a key driver for all the major vendors’ stories around blade servers, with early signs of interest from the end-user community, but a long way to go in market adoption."

The Server Tracker reports lists a number of market highlights around x86 revenues, operating systems and volume servers.

The revenue from x86 servers reached $2.2 billion (€1.75 billion), equivalent to 72.2% of the total market, a decline of 3.5% annually. Refreshed 2-socket products fuelled marginal installed base upgrades and a positive average selling value trend, but the concomitance of a weak currency rate and broader macro concerns kept a lid on growth, especially in mature economies. This was the 14th consecutive quarter in which x86 sales surpassed non-x86 servers, as the market trend toward industry standard servers consolidates across EMEA. The average rate of decline in the non-x86 market was 27.5%, with mainframes experiencing the sharpest fall in non-x86, down 35.9%, followed by EPIC and RISC systems, down 29.4% and 21.6% respectively. RISC revenue reached $473.3 million, or 15.3% of the market, up from 14.5% the previous quarter. Mainframe sales reached $235.5 million, or 7.6% of total EMEA sales, down from 8.4% the previous quarter.

By operating system, Windows held 51.4% of the market, generating hardware spending of around $1.5 billion (€1.19 billion), down 4.0% year-on-year. Linux experienced the softest decline year-on-year, down only 1.2% after generating sales of $626.2 million, or around 20.3% of total market sales. 2Q12 was the third time that Linux overtook Unix in market share since records began. The first time this happened was in 3Q11. Unix declined 27.2% on the back of weaker RISC system sales, with sales of $555.5 million. Of the main operating systems, only z/OS declined faster than Unix, by 40.0% to reach $185.0 million.

Volume servers continued to hold the overwhelming majority stake in the market, with 68.4% of total revenue, or $2.1 billion (€1.67 billion), despite a decline of 3.7%. Both the midrange and high-end segments saw double-digit declines, at 26.4% and 24.2% respectively. High-end server revenue reached only $624.6 million, around 20.2% of the total EMEA market, due to a slowdown in mainframe sales.

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