Server revenue falls despite demand
5 December 2012 | 0
According to the latest EMEA Server Tracker report from IDC, factory revenue in the EMEA server market reached $2.8 billion (€2.1 billion) in the third quarter of 2012, down 10.4% on the same quarter of 2011. In euro terms, things looked a bit brighter said the report, with overall spending flat year on year at €1.7 billion (€1.3 billion).
Shipments reached 526,701 units, representing a 4.0% annual decline. The quarter-on-quarter performance displayed a mixed picture with growth in the single digits in the volume area, which was up 2.4%, and the usual seasonality in overall dollar revenue, showing a quarterly decrease of 7.0%.
The x86 server segment remained the main growth engine, with revenue of $2.1 billion (€1.6 billion), equivalent to 76.4% of the total value market (an increase of 4.2 percentage points quarterly and 2.9 percentage points annually). Industry-standard servers suffered declines in both the value and volume areas, down 6.8% and 3.6% respectively year on year. x86 average selling values in dollars declined 4% quarter on quarter due to larger numbers of ultra-low-end towers and density optimised servers.
Non-x86 sales could not overcome the $1 billion (€762 million) mark in the quarter, with revenue of $678.2 million (€517 million), they were down 20.3% year on year. Despite a gentler decline than in previous quarters, when annual comparisons were distorted by pent-up demand from post-recessionary refresh cycles, when looking at the absolute dollar figures, non-x86 revenue has hit its lowest point in EMEA since IDC records began. This is due to the combination of a tight macroeconomic environment in parts of the region and the CPU refresh cycles that are expected from all the major platforms – IBM (Power and z Systems), HP (Integrity), and Oracle (SPARC T5) – between the very end of 2012 and the beginning of 2013.
RISC systems performed slightly better than the non-x86 market average, mostly due to a few very large HPC deals based on IBM BlueGene technology in Western Europe. IDC believes legacy platforms should show some improvements with the product refreshes in the next few quarters, but it is unlikely sales will ever return to pre-recession levels.
EMEA market highlights
"In a constrained business environment, server spending across the board was relatively solid, considering that legacy platforms had a low quarter due to pending product refreshes," said Giorgio Nebuloni, research manager, Enterprise Server Group, IDC EMEA. "The run-rate data centre business, which is fundamentally sustained by 2-socket x86 rack and blades, performed well enough across the regions in the wake of latest processor refreshes, but the real boosts were provided once again by large HPC projects and, especially in northern Europe and Russia, by vast deployments at cloud and Web service providers. IDC maintains that healthy volume growth will continue to come from these two sources in 2013, but vendors might feel the pressure on margins as mega-data centres demand more compute capacity at lower prices."
Western European highlights
The Western European market continued to reflect the general trend toward x86 servers, which generated sales of $1.6 billion (€1.22 billion), or 76.2% of the total factory revenue in 3Q12 (compared with 72.3% in 2Q12). Non-x86 sales contributed less than a quarter of the market in 3Q12, at $504.6 million (€385 million), or 23.8% of the total Western European market.
"Western Europe was affected by stronger declines than the emerging economies of EMEA, with server revenue down 11.7% annually, slightly worse than the EMEA average," said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA. "Despite this, the discrepancies between the mature economies of this area and the rest of EMEA are starting to soften as the deteriorating macroeconomic conditions begin to have a negative impact across all the geographies in the region. Server market trends are becoming more uniform and the percentage of non-x86 expenditure was nearly on a par with CEMA, pointing at an acceleration in the migration to x86 and a progressive demise in demand of legacy architectures. In Western Europe, demand was strong in Germany and the UK, but weakened in geographies such as France and Italy, where the current EU crisis is driving organisations to be extremely cautious with their IT budgets."
Vendor highlights, 3Q12
HP held the top spot in the EMEA server market in 3Q12 after outperforming IBM by 10.8 percentage points and surpassing the $1 billion mark despite declining by 17.0% annually. HP remained the x86 leader, with the ProLiant line reaching the equivalent of 44.1% of the total x86 market in EMEA. HP had a revenue share of 56.8% of the total blade market combined, with blade revenue from x86 servers surpassing $300 million, and the Integrity NonStop line growing strongly.
IBM had a revenue share of 27.0% of the total EMEA market in 3Q12, and the single-digit revenue decline of 8.5% was much softer than the 19.0% decline seen in the previous quarter. Notably, the vendor’s top revenue-generating server line was the x86 System x family with $262.2 million, followed closely by the RISC Unix line of Power Systems, which sold $239.4 million. System z servers sold $94.2 million and were down 27.8% annually, a softer decline than the 51.4% seen in 2Q12.
Dell increased its share of the EMEA server market by two percentage points in 3Q12, the same rate of growth as in 2Q12, and has been maintaining a consistent pace of expansion throughout the last few quarters in terms of market share. The vendor’s PowerEdge line grew 3.0% annually, at around $439.9 million. Dell was the only vendor in the top 5 to enjoy annual growth, as it is not exposed to declines in the non-x86 area.
Fujitsu maintained its market share year on year, and maintained a single-digit decline that was softer than the market average, down 7% annually. Moreover, it climbed to tie Oracle at fourth position in revenue share. The Primergy line of x86 servers accounted for 68.1% of its total revenue, while the BS2000/OSD family of mainframe servers continued as an important source of server sales for the vendor, exceeding the $50 million mark for the quarter.
Oracle’s revenue declined by 35.4% year on year, which was the strongest annual drop among the main players. The RISC Unix family of SPARC systems declined 43.1% annually, after generating $87 million. Oracle is growing its share of server sales in the area of x86-based solutions, thanks to the expanding family of Engineered Systems. x86 servers accounted for 41.8% of Oracle’s total business in the quarter.