EMEA Server Revenue Declined 11.9% Annually in 1Q12 With Sales of $3.1 Billion in Second Consecutive Quarter of Revenue Declines, Says IDC
According to the latest EMEA Server Tracker from International Data Corporation (IDC), factory revenue in the EMEA server market reached $3.1 billion in the first quarter of 2012 (1Q12), down 11.9% when compared with the same quarter of 2011. Shipments reached 556,877 units, representing a 3.8% annual decline. Quarter-on-quarter performance was even weaker than the annual one, with double-digit declines in both the value and the volume areas, which were down 23.9% and 13.1% respectively. This was the second consecutive quarter of annual revenue declines, and the first double-digit decrease since 3Q09, in the midst of the first downturn. Server sales suffered declines in both annual as well as quarterly comparisons.
The x86 server segment remained the main growth engine, with revenue of $2.2 billion, equivalent to 73.0% of the total value market. Industry standard servers suffered relatively soft declines in both the value and volume areas, down 3.4% and 3.2% respectively year on year. Non-x86 sales dived well below the $1 billion mark, at $841.9 million, a decline of 28.7% annually. 1Q12 was the 13th consecutive quarter in which x86 sales surpassed non-x86 server sales.
EMEA Market Highlights
"EMEA server vendors in 1Q12 continued to face up to a number of market challenges, compounded by a very difficult economic environment. Overall, the EMEA server market in 1Q12 was in line with IDC expectations and presented a very mixed picture in terms of server spending, with countries across the region showing important discrepancies in terms of trends. Large HPC projects and investments in public cloud infrastructures from hosters and Web 2.0 players and private cloud infrastructure projects in the large enterprise continue to play out significantly in those differences," said Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA.
Western European Highlights
The Western European market continued to reflect the general trend toward x86 servers, which generated sales of $1.6 billion, or 71.8% of total factory revenue in 1Q12, compared with 65.4% in 1Q11. Non-x86 sales reached considerably less than half that amount at $668.5 million, representing just 28.2% of the total Western European market.
"The Western European region is a mature market and the difficult macroeconomic conditions, as well as the uncertainty about the future of the euro area, compounded the current slowdown in server spending, particularly in the non-x86 market, leading to server sales declines sharper than in other EMEA subregions. Demand for mainframes was the worst hit, followed by a softer slowdown in the RISC Unix area," said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA. "Server sales are also influenced by the timing to market of new hardware releases, and the x86 segment has been very dynamic whereas the mainframe area has not produced important hardware releases in the last 12 to 18 months, adding to the overall slowdown in sales cycles."
"Central and Eastern Europe, the Middle East, and Africa [CEMA] combined recorded the first negative quarter in over a year and 1Q12 resulted in a 3.7% year-on-year decline totaling $752.96 million. An uncertain economic environment, coupled with austerity measures in the public sector across many countries in the region, had an adverse effect on server demand. Despite the overall unfavorable economic conditions, Central and Eastern Europe [CEE] remained positive. Strong server sales in Russia helped to offset shrinking demand in the rest of CEE, enabling the CEE region to grow 4.0% year on year to reach a total market value of $397.72 million. The Middle East and Africa [MEA] region recorded the third consecutive decline, with server sales at $355.25 million, down 11.0% year on year. Performance across the countries was mixed, with Saudi Arabia and Israel among the countries with positive growth, while Turkey and South Africa recorded double-digit declines," said Jiri Helebrand, research manager, IDC CEMA.
Modular Server Highlights
"Approximately 90,000 blade servers were sold in EMEA in 1Q12, with volumes overall stable year on year, thanks to a few large HPC deals with Intel Xeon-based machines in Western Europe. While this helped x86 blade revenue to stay flat year on year, non-x86 blades saw a stark double-digit contraction, leading to a 5% annual decline in overall blade revenue in the region," said Giorgio Nebuloni, senior research analyst, Enterprise Server Group, IDC EMEA.
"Density optimized machines in the meantime are continuing to show strong growth, and doubled their volumes from 1Q11 to reach almost 20,000 units, mostly driven by large cloud service provider installations this quarter. Overall, modular servers — including both blades and density optimized machines — accounted for 20% of the server nodes shipped in the region for each of the past four quarters. This shows that demand for compact, ever more powerful computing solutions is rock solid, but also puts EMEA datacenter facilities increasingly under pressure to deliver unparalleled power density on a per-rack and per-square-meter basis," said Nebuloni.
- x86 revenue reached $2.2 billion, equivalent to 73.0% of the total market, a decline of 3.4% annually. This was the 13th consecutive quarter in which x86 sales surpassed non-x86 servers, as the market trend toward industry standard servers consolidates. EPIC servers experienced the sharpest fall in non-x86, down 46.5%, followed by CISC and RISC systems, down 34.3% and 16.8% respectively. RISC revenue reached $451.8 million, or 14.5% of the market, while mainframe sales reached $263.1 million, or 8.4% of total EMEA sales.
- By operating system, Windows held 52.0% of the market, generating hardware spending of around $1.6 billion, down 0.6% year on year. Linux was the only operating system to experience positive growth year on year, up 6.5% at $750 million, or around 20.7% of total market sales. 1Q12 was the second time that Linux overtook Unix in market share since records began. The first time this happened was in 3Q11. Unix declined 27.6% on the back of weaker RISC system sales, with sales of $542.4 million. Of the main operating systems, only z/OS declined faster that Unix, by 39.3% to reach $201.9 million.
- Volume servers continued to hold the overwhelming majority stake in the market, with 69.9% of total revenue, or $2.1 billion, despite a decline of 6.3%. Both the midrange and high-end segments saw double-digit declines, at 16.6% and 25.6% respectively. High-end server revenue reached only $590.5 million, around 18.9% of the total EMEA market, due to a slowdown in mainframe sales.
- From a form factor perspective, racks remained the single largest segment of the market, with $1.5 billion, equivalent to 50.5% of total sales, but declining 9.3% year on year. Tower or standalone servers suffered a sharp decline, down 22% year on year. Although they retained second position, the gap between market share for blades and towers is quickly narrowing, with blades taking 19.9% of the market against 26.6% for towers. Blades declined more softly than other form factors, by 5% annually, and reached $620.4 million in sales. Density optimized servers were the only growing segment, up 43% year on year with revenue of $61.5 million.
Vendor Highlights, 1Q12
- HP recovered the top spot in the EMEA server market in 1Q12, held by IBM in 4Q11 for the first time since the fourth quarter of 2007. The vendor outperformed IBM by 11.9 percentage points despite a decline of 19.1%. HP remained the x86 leader, with the ProLiant line selling $1 billion, around 89.3% of total revenue for the vendor, and 46.8% of the total x86 market in EMEA. HP had a revenue share of 54.9% of the total blade market in both x86 and non-x86.
- IBM had a revenue share of 26.3% of the total EMEA market in 1Q12, despite double-digit annual revenue declines. The vendor's top revenue-generating server line was the x86 family of System x servers, which sold $251.4 million, closely followed by its RISC Unix line of Power Systems with $248.5 million. System z servers generated $143.0 million, as the transition to new CISC models takes place from the earlier generation of mainframes, the zSeries, which generated $58.8 million.
- Dell increased its share of the EMEA server market by 2.4 percentage points in 1Q12 when compared with 1Q11, maintaining the same pace of growth as it did in 4Q11 when looking at annual-basis comparisons. The vendor is benefiting from strong demand for high-end x86 servers and its PowerEdge line revenue grew 6.3% year on year at around $436.5 million, on the back of sales to large cloud services providers.
- Oracle grew its market share slightly, by half a percentage point, despite an annual revenue decline of 6.2%. Oracle's SPARC family generated 57.3% of the vendor's sales, followed closely by x86-based solutions, growing strongly in revenue thanks to integrated system offerings and accounting now for 38.6% of Oracle's server business.
- Fujitsu grew its market share by 0.2 percentage points despite an annual decline of 7.4%, and continued to successfully transition the business mix to its Primergy line of x86 servers, which accounted for 65.5% of its total revenue. The BS2000/OSD family of mainframe servers produced a sizeable share of server sales for the vendor, with 34.4% of the total.
Top 5 Corporate Vendors, EMEA Server Factory Revenue, First Quarter of 2012 (1Q12) ($M)
1Q12 Server Revenue
1Q12 Market Share
1Q11 Server Revenue
1Q11 Market Share
1Q12/1Q11 Revenue Growth
Source: IDC's EMEA Quarterly Server Tracker, June 2012
IDC's EMEA Quarterly Server Tracker is a quantitative tool for analyzing the server market on a quarterly basis. The tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, country, operating system, price band, CPU type, and architecture.