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EMEA Server Market Rebounded in 1Q10, With First Annual Growth Gains Since 2008 and Revenue Up 7.4% Annually, Driven by Demand for x86 Systems, Says IDC

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Press release

LONDON, June 2, 2010 - According to the International Data Corporation (IDC's) EMEA Quarterly Server Tracker, the server market enjoyed a strong pick up in the first quarter of 2010, with revenue up 7.4% annually, to $ 3.2 billion. Units returned to double- digit growth, up 16.4% year on year, with around 560,000 systems shipped. The figures indicate a welcome upsurge in the market, after double-digit annual revenue declines in every quarter of 2009.

However, EMEA server revenue in 1Q10 remained weak when compared with the pre-recession figures of $ 4.4 billion in 4Q08, and was far below the peak of the market in 4Q07, when server sales hit $ 5.4 billion. Quarter-on-quarter performance took a dive in the value area, with revenue down 19.9%, indicating the market is still fluctuating.

There was a sharp imbalance between x86 and non-x86 technologies, with industry- standard servers as the main market engine, taking a record 64.8% of the total revenue. Sales of x86 servers nearly doubled that of non-x86 servers, with industry- standard systems generating $ 2 billion of factory revenue against $ 1.1 billion for enterprise servers.

According to Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA, ""The server market is currently undergoing a silent revolution, whose main drivers are technology developments that which are driving seismic changes in customer usage patterns. European organizations are currently evaluating at technologies such as scale--out environments, virtualization, and cloud computing, which are all promising to run IT infrastructure more efficiently.""

In the non-x86 segment, new competitive vendor dynamics, such as the Sun acquisition, combine with pound server refresh cycles and go-to-market strategies to create a particularly challenging market".

""This quarter marked the first incursion into positive annual growth rates by the EMEA server market since the second quarter of 2008. Whilest it is encouraging that annual growth rates in EMEA are higher than trends recorded on a worldwide basis, the quarter-on-quarter growth data indicates this recovery is far from consolidated"," said Beatriz Valle, senior research analyst in the Enterprise Server Group for IDC EMEA.

Blade Server Segment

""With a year- on- year growth of 12% in units, blade servers performed slower than the market average for the first time ever, as the bulk of shipments in 1Q10, both from mid- and large enterprises, came from a huge refresh of 2-sSocket x86 rack machines. However, blade grew yearly 32% in revenue against a 7% market average, a sign that those platforms keep attracting large enterprise investments"," said Giorgio Nebuloni, senior research analyst in the Enterprise Server Group for IDC EMEA.

Emerging Market Dynamics

According to Stefania Lorenz, research director for IDC CEMA, ""Both emerging markets in the EMEA region resumed growth at faster rates than Western Europe. The economies of the Central and Eastern European [(CEE]) sub-region, which lost market share against the Middle East and Africa during 2009, enjoyed the fastest growth rates, with sales growing 14.1% in 1Q10 on 1Q09, on the back of strong growth in Russia, whose revenue was up 58% year on year, with most of this growth in the x86 segment. In the Middle East and Africa [(MEA]), server revenue was up 9.4% annually. Revenue from the CEE and MEA sub-regions was 9.4% and 11.2% of the total EMEA revenue respectively in the first quarter of 2010"."

Top Server Market Findings

  • x86 servers grew annually by 33.3%, whilest enterprise non-x86 systems saw their revenue decline 20.7% annually. In Within the non-x86 segment, there were varying degrees of de--acceleration. RISC servers suffered the most, down 23.9% in 1Q10 on 1Q09. Both CISC-based mainframes, and EPIC-based servers running on Intel''s Itanium processors, experienced similar annual losses of 16.1% and 17.3% respectively.
  • RISC continued as the single biggest non-x86 segment, with $ 600 million in revenue. Issues around time to market are having an impact on RISC Unix results, and it will be necessary to hold on for a couple of quarters to appreciate the full picture of this segment''s results.
  • The gap between the two main operating systems widened, driven by the shift towards the x86 market. Windows outstripped Unix by a factor of nearly two2 to one1, taking $ 1.5 billion in revenue in EMEA. Microsoft''s operating system saw its revenue increase 32.9%, whilest Unix was down 20.8% year on year.
  • Volume servers, those priced below $ 25,000 K, continued to drive the market with annual growth of 31%, reflecting the dominant position of x86 technologies. The midrange and high-end segments both suffered double-digit annual revenue losses at 24.7% and 18.5% respectively, but the midrange segment is expected to pick up in the next few quarters as a result of new RISC Unix platform introductions.
  • Blades were the fastest-growing form factor, up 32.4% year on year. Rack servers generated $ 1.6 billion against $ 1 billion for pedestal systems. Pressing customer pain points around the physical limitations of the data center, including space constraints and power and cooling issues, will be driveing this trend forward in the foreseeable future.

Vendor Highlights

  • HP stayed in the number one 1 spot for the ninth consecutive quarter, with revenue growing in the double -digits, on the back of its ProLiant family of servers. Sales of this server family exceeded $ 1 billion in EMEA. HP''s Integrity systems, based on Intel''s Itanium processors, saw their its percentage of theis vendor''s business decrease. The vendor released next-generation Itanium-based systems in April based on Itanium 9300 processors. In terms of blades, HP remains the leader with a 63.7% revenue share.
  • IBM continued as the second vendor this quarter, with a slight dip in revenue year on year due to its reliance on the RISC Unix platform business, and the time to market of the new Power System models running on POWER7 processors, released in February. Its percentage of the overall server revenue, however, increased year on year by three full percentage points. Its x Series family of servers took a record 37.6% of the total business for this vendor.
  • Dell enjoyed double-digit annual revenue growth of 29.2%, on the back of the overall market uptake in x86 and improved business conditions in the key U.K. market. The vendor has been quick releasing to market models based on next-generation x86 processors by both Intel and AMD. Dell is currently bringing to market new x86 products to address both scale-out and scale-up computing environments in the EMEA region.
  • Sun Microsystems, whose servers are now co-branded under the Sun/Oracle name, suffered annual revenue declines in the double digits, despite a market share increase of more than two percentage points year on year. With RISC Unix market dynamics set to unfold over the next few quarters, the current uncertainty surrounding Sun''s server roadmap, and other market players targeting its RISC Unix offerings, the way Oracle develops its strategy in this area will play a critical role in the future of this server segment.
  • Fujitsu enjoyed annual growth rates approaching double- digit territory. The vendor is benefiting from the strength of its CISC-based business, particularly in Germany. Its mainframes retained the same percentage of the total revenue as in the first quarter of 2009, with 33.9% of the total revenue. At the same time, x86 revenue from Primergy servers grew 17.2% year on year, facilitating Fujitsu''s expansionary plans in this x86 area.



Top 5 Corporate Vendor Family, EMEA Server Factory Revenue, 1First Quarter of 2010 (Millions)

Vendor

1Q10 Revenue

1Q10 Market Share

1Q09 Revenue

1Q09 Market Share

1Q10/1Q09 Revenue Growth

HP

$1,313.26

41.5%

$1,080.13

36.7%

21.6%

IBM

$790.57

25.0%

$832.09

28.2%

-5.0%

Dell

$372.72

11.8%

$288.49

9.8%

29.2%

Sun

$304.05

9.6%

$361.13

12.3%

-15.8%

Fujitsu

$209.46

6.6%

$193.83

6.6%

8.1%

Other

$173.35

5.5%

$190.28

6.5%

-8.9%

Total Market

$3,163.41

100.0%

$2,945.94

100.0%

7.4%