EMEA Server Market Down 10.5% in Revenue in 1Q13 With Double-Digit Declines in Western and Central and Eastern Europe but Softer Decline in Middle East and Africa

Frankfurt and London - 10 June 2013

According to the latest EMEA Server Tracker from International Data Corporation (IDC), factory revenue in the EMEA server market reached $2.8 billion in the first quarter of 2013, a decrease of 10.5% when compared with the same quarter of 2012. In euros, revenue reached €2.1 billion, a decrease of 11.1%. Shipments reached 520,000 units, a more subdued decline of 5.7%. 1Q13 was the sixth consecutive quarter since 4Q11 of annual revenue declines in EMEA, after a period of growth during 2010 and early 2011, when European organizations resumed the investments in infrastructure that had been postponed during the recession of 2009.

x86 server revenue declined 1.5% year on year in 1Q13, while non-x86 server revenue declined 34.8%. x86 server sales reached 80.4% of the total in EMEA for the first time, confirming the irreversible dominance of industry standard technologies. Volume servers in 1Q13 were down 3.4% year on year, while midrange and high-end servers declined 14.6% and 33.3% respectively. Whereas 1Q13 was the sixth quarter of declines for volume and midrange servers, and the seventh quarter for the high end, the declines in the volume area have been consistently in the single digits, unlike higher-priced servers, mostly in double-digit territory. This trend signals that organizations are opting for lower-priced servers, a consequence of both migration to x86 and the softening of overall demand.

"Despite product launches by major vendors and ever-improving value for money, systems based on RISC and EPIC processors, typically supporting traditional Unix environments, have struggled to keep afloat, with yearly revenue declines of around 40%+. Part of the spending intended to keep core business applications running is now absorbed by new integrated system offerings combining x86 and lower-end RISC/EPIC blades with storage and networking back-ends. It appears now that alongside integrated multisocket platforms built around specific workloads, such as SAP HANA appliances, the integrated system area will become the key battlefield for all enterprise system vendors that want to generate gross margins above 30%," said Giorgio Nebuloni, research manager, Enterprise Server Group, IDC EMEA.

"The transition to x86 accelerated this quarter. In Western Europe, annual demand for x86 servers was almost flat, with revenue down 0.9% while sales of non-x86 legacy architectures dived by 35.7% year on year. RISC sales were particularly hit, down by 49.8% year on year, whereas mainframe revenue suffered single-digit declines of 4.8%. Big organizations in the corporate space and government are consolidating existing infrastructure using high-end x86 servers, with demand for legacy architectures at an all time low," said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA.

CEMA Highlights

"Central and Eastern Europe, the Middle East, and Africa [CEMA] combined recorded the third consecutive decline in 1Q13. Server revenue reached $685.03 million, representing a 9.7% year-on-year decrease — a result of deteriorating economic conditions in Europe and weak demand for Unix servers. The Central and Eastern Europe [CEE] subregion was down by 12.9% to $348.09 million, mainly pulled down by lackluster server sales in Russia. Positive developments were seen in Poland, Czech Republic, and Hungary. The Middle East and Africa [MEA] subregion fared slightly better than the CEE and Western European regions, but revenue was also down. Indeed, $336.94 million represented a year-on-year decline of 6.1%, impacted by weak performance in Israel and South Africa. In contrast, Saudi Arabia and United Arab Emirates recorded double-digit growth," said Jiri Helebrand, research manager, IDC CEMA.

Modular Server Highlights

Blade revenues declined to $601 million in EMEA, which means a 5.0% drop YoY, despite large deals in commercial HPC in France. In contrast, density optimized servers achieved impressive YoY growth of 103.3% and accounted for $124 million of revenue. Density optimized remains the fastest-growing form factor, with its share of EMEA server revenues doubling from 2.0% in 1Q12 to 4.4% in 1Q13.

"The share of modular server shipments in EMEA increased from 19.9% in 1Q12 to 22.7% in 1Q13. This growth has been driven by the increasing popularity of density optimized servers particularly in the HPC area, with investments from large businesses across verticals such as manufacturing and finance, but also the public sector and in large cloud service providers. Traditional tower servers are also increasingly being replaced by modular servers, while blades have started to lose their edge as the technology matures and density optimized servers increasingly take over higher-end workloads," said Andreas Olah, research analyst, Enterprise Server Group, IDC EMEA. "Modular server shipments have grown across the Nordics and Austria, while a large deal with a cloud services provider in Ireland more than tripled density optimized shipments into that country. At the same time, the major markets of Germany, the U.K., and France saw modular shipments decline in line with the overall drop in server shipments."

Market Highlights

  • x86 revenue share reached 80% ($2.2 billion) of the market in 1Q13, with small annual declines of 1.5% in EMEA overall, and with annual revenue growth of 3.7% in the Middle East and Africa. Non-x86 revenue declined in every subregion, with an average decline of 34.8% for the whole of EMEA. All legacy CPUs lost market share, with EPIC, RISC, and CISC down by 48.9%, 44.6%, and 11.1% respectively.
  • Windows and Linux operating systems revenue declined by 1.7% and 1.9% respectively, with Windows' share reaching 57.1% of the total market ($1.5 billion). Linux overtook Unix for the fifth consecutive quarter, with 22.7% against 10.4% of the total. The mainframe z/OS operating system declined 13.8% year on year.
  • Rack servers were the leading form factor with 53.2% ($1.4 billion) of the total market, and annual declines of 5.6%. Tower servers suffered the steepest declines, down 31.5%, and density optimized systems enjoyed triple-digit growth (103.3%), albeit from a very low share (4.4% of the market).

Overall Server Market Standings by Vendor

HP held the number 1 spot in 1Q13, despite annual revenue declines of 13.5% due to weaker demand for x86-based ProLiant servers, which were challenged by competitive pricing pressure, and continued weakness in Itanium-based Integrity server revenue. IBM held the number 2 spot with a 22.4% share for the quarter as factory revenue decreased 23.5% compared with 1Q12. Demand for IBM's Power Systems and System z systems declined year over year. Dell maintained the third position and was the only vendor in the top 5 to see revenue increases in the double digits, with sales growing 12.6% year on year and a 3.5 percentage point increase in market share year on year, helped by strong demand from its density optimized datacenter solutions business.

Fujitsu was in fourth place, with a slight decline of 0.5% annually, and increasing its share by 0.7 percentage points, thanks to good performance of both its PRIMERGY line of x86 systems and its BS2000/OSD family of mainframes. Oracle was in fifth place with revenue down 32.1%, after sales of its RISC Unix line of SPARC Enterprise servers and Sun x86 line of industry standard systems both suffered losses. However, sales of the Engineered Systems family continued to grow by double digits in the region.

Top 5 Corporate Family, EMEA Server Factory Revenue, First Quarter of 2013

Vendor

1Q13 Server Revenue

1Q13 Market Share

1Q12 Server Revenue

1Q12 Market Share

1Q13/1Q12 Revenue Growth

HP

$1,032.7

36.9%

$1,193.3

38.2%

-13.5%

IBM

$628.2

22.4%

$820.8

26.3%

-23.5%

Dell

$491.4

17.5%

$436.6

14.0%

12.6%

Fujitsu

$181.6

6.5%

$182.4

5.8%

-0.5%

Oracle

$154.1

5.5%

$227.0

7.3%

-32.1%

Other

$312.2

11.1%

$266.8

8.5%

17.0%

Total market

$2,800.0

100.0%

$3,126.9

100.0%

-10.5%

Source: IDC Quarterly Server Tracker, May 2013

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.

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