EMEA Server Revenue Declined 6.7% Annually in Fourth Quarter As Non-x86 Sales Plummeted

Full-Year Revenue Rose 3.4% to $14.3 Billion in 2011, Says IDC
(PresseBox) (London/Prague, ) According to the latest EMEA Quarterly Server Tracker from International Data Corporation (IDC), factory revenue in the EMEA server market reached $4.1 billion in the fourth quarter of 2011 (4Q11), down 6.7% on the same quarter in 2010. Shipments reached 640,636 units, representing a 2.1% annual decline. Quarter-on-quarter performance, however, was much stronger, with a 27.8% revenue increase. Shipments were also up, by 16.8% to 548,713 units, in 4Q11. Year-on-year growth rates in 4Q11 have been slightly distorted by the spike in demand in 4Q10, leading to a sharp drop in revenue growth in non-x86 that has negatively impacted overall revenue performance. For full-year 2011, EMEA server factory revenue increased 3.4%, with sales increasing from $13.9 billion in 2010 to $14.3 billion in 2011, on the back of strong performance in the x86 market, up 7.0% in 2011 on the previous year.

The x86 server segment remained the main growth engine, and x86 revenue reached $2.7 billion, equivalent to 66.6% of the total market, against $1.3 billion for non-x86. The fourth quarter was the 12th consecutive quarter in which x86 sales surpassed non-x86 server sales. IDC expects microprocessor releases such as the forthcoming Intel Xeon E5 2600 to accelerate this trend. Non-x86 sales declined 17.2% in EMEA in 4Q11, though quarter-on-quarter performance was very strong, with revenue up 58.5%.

"The EMEA server market in 4Q11 was in line with IDC expectations and continues to present a very mixed picture in terms of server spending, with countries across the region showing some very large discrepancies in terms of trends," said Nathaniel Martinez, research director, European Enterprise Servers. "Large HPC projects and investments in public cloud infrastructures from hosters and Web 2.0 players play out significantly in those differences. Demand for datacenter optimizations to support virtualization, automation, and cloud strategies are also at play in some of the more mature segments. Overall, IDC anticipates that EMEA server vendors will face a challenging environment in the first half of 2012, compounded by poor macroeconomic conditions, upcoming elections in major economies, and supply chain shortages."

Western European Highlights

The Western European market continued to reflect the general trend toward x86 servers, which generated sales of $2 billion, or 65.7% of total factory revenue in 4Q11, compared with 62.1% in 4Q10. Non-x86 sales reached half that amount at $1 billion, representing just 34.3% of the total Western European market.

"IDC expects the long-term outlook in the non-x86 market to follow a downward trend, especially in the RISC Unix area, where new competitive vendor dynamics as well as technological developments such as migration to x86 have substantially changed the market landscape," said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA. "As a result, the RISC Unix revenue share of the Western European market for 2011 was just 13.6%, down from 24.0% in 2008. Overall, the non-x86 figures looked particularly weak in 4Q11 because of a spike of demand in CISC hardware in 4Q10. Western European organizations in financial services, banking, and government, and large corporations across all vertical segments, delayed hardware technology refreshes during the recession of 2009, a trend that, compounded with new releases in mainframe technologies, led to pent-up demand in the fourth quarter of 2010."

CEMA Highlights

"Central and Eastern Europe, the Middle East, and Africa (CEMA) combined recorded a flat increase in 4Q11, with revenue at $1.05 billion, representing 0.3% year-on-year growth. Server sales in Central and Eastern Europe (CEE) grew 5.2% year on year, reaching $622.27 million. In contrast, Middle East and Africa (MEA) server revenue was down 6.1% year on year, with market value dropping to $424.97 million. Strong performance in the Russian market, driven primarily by continuing refreshment activity in the public sector, helped to keep the CEE server market afloat as server sales in countries such as Czech Republic and Poland recorded a double-digit contraction. Despite demand from the HPC environment seen in South Africa and Turkey, the MEA region continued to decline and Israel was the only Middle Eastern country with positive growth. The markets in Saudi Arabia, Turkey, and United Arab Emirates all declined," said Jiri Helebrand, senior research analyst, IDC CEMA.

Blade Market Highlights

Blade demand in the fourth quarter, traditionally rich in large deployments and end of fiscal year spending, remained solid in EMEA with shipments roughly flat year on year and vendor revenue up 5% year on year to more than $770 million.

"Non-x86 blade revenue declined year on year after several quarters of strong growth, representing 10% of overall blade revenue. On the x86 side, all regions exhibited positive growth, with some large HPC deals in Western Europe and a good run-rate in indirect channels to midmarket customers helping the expansion. IDC expects blades to remain a crucial element for revenue generation in 2012, when they are expected to account for roughly a fifth of server spending in the region," said Giorgio Nebuloni, senior research analyst, Enterprise Server Group, IDC EMEA.

Density Optimized Server Highlights

In November 2011, IDC introduced a new form factor called hyper-scale servers. Beginning with the 4Q11 Tracker, IDC now refers to these servers as density optimized systems in order to reduce confusion with the broader hyper-scale market segment which spans large-scale, Web 2.0, hosting, and HPC environments. This category, in addition to density optimized servers, also consumes significant numbers of traditional rack-optimized servers. Density optimized servers are designed for datacenter environments where parallelized workloads are prevalent and are currently based on x86 processors only. The form factor serves the unique needs of these datacenters with streamlined system designs that focus on performance, energy efficiency, and density.

Density optimized server demand in EMEA grew 16.6% year over year in 4Q11 to $60.1 million as unit shipments increased 72.4% to 18,285 servers. Density optimized servers remained a niche technology, representing only 1.5% of all server revenue and 2.9% of all server shipments.

Market Highlights

- x86 revenue reached $2.7 billion, equivalent to 66.6% of the total market, despite flat growth of 0.4% annually. This was the 12th consecutive quarter in which x86 sales surpassed non-x86 servers, despite the latter's higher average selling prices. EPIC servers experienced the sharpest fall in non-x86, down 33.2%, followed by CISC and RISC systems, down 17.2% and 10.8% respectively. RISC revenue reached $670.4 million, or 16.3% of the market, while mainframe sales reached $503.1 million, or 12.2% of total EMEA sales.
- By operating system, Windows held 48.2% of the market, around $1.9 billion, but was down 0.6% year on year. Linux was the only operating system to experience positive growth year on year, up 0.8% at $750.0 million, or around 18.2% of total market sales. Unix declined 16.6% on the back of weaker RISC system sales, with sales of $795.8 million, but maintained a higher market share over Linux, with 19.3% of overall sales. The z/OS operating system declined 21.9% to 417.0 million.
- Volume servers continued to hold the overwhelming majority stake in the market, with 61.1% of total revenue, or $2.5 billion, despite a decline of 4.3%. Midrange servers suffered the softest decline, down 3.3% with sales of $502.6 million in 4Q11. Despite accounting for just 12.2% of total revenue, this segment is set to grow as densely configured x86 servers take on more workloads previously deployed on non-x86 systems. High-end server revenue reached $1 billion, down 13.1% year on year, due to a slowdown in mainframe sales.
- From a form factor perspective, racks remained the single largest segment of the market, with $1.9 billion, or 47.1%, of the total, but declining 7.0% year on year. Tower or standalone servers held second place, with $1.3 billion, but a double-digit decline of 12.7% seems to indicate that SMBs are now resorting less to this form factor and turning to racks and blades. Blades continued to gain market share, growing 5.1% year on year and reaching 18.8% with $772.4 million in sales. With annual growth of 16.6% in revenue, density optimized servers represented only 1.5% of overall server spending in the region, but accounted for almost 3% of volumes, as large cloud providers and HPC customers continue to expand usage cases for the form factor.

Vendor Highlights, 4Q11

- IBM gained the top spot in the EMEA server market for the first time since the fourth quarter of 2007, outperforming HP by 0.3 percentage points. The RISC Unix line of Power Systems was its main revenue generator, with sales of $483.8 million, around 34.2% of the total for the vendor. The x86 family of System x servers sold $383.3 million.
- HP remained the absolute leader in x86, with the ProLiant line selling $1.2 billion worth of servers in EMEA, around 86.1% of total revenue for the vendor, and 44.0% of the total for all vendors in EMEA. HP had a revenue share of 51.9% of the total blade market in EMEA.
- On the back of strong sales to large cloud service providers, and being able to offset hard disk supply shortages relatively well, Dell increased its share of the EMEA server market by 2.4 percentage points in 4Q11 when compared with 4Q10. PowerEdge revenue grew 17.0% year on year at around $500 million, the highest server hardware figure achieved by Dell in EMEA since IDC records began.
- Oracle maintained a stable market share in 4Q11 on 4Q10, with a loss of only 0.1 percentage points. Its SPARC RISC Unix family generated 50.3% of the vendor's sales, followed closely by x86-based solutions, growing 14% annually in revenue and accounting now for 45.5% of Oracle's server business.
- Fujitsu continued to successfully transition to its Primergy line of x86 servers, which accounted for 64.5% of its total revenue. The BS2000/OSD family of mainframe servers also produced a sizeable share of server sales for the vendor, with 35.5% of the total.

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.

For more information, please contact Nathaniel Martinez on +44 (0) 20 8987 7184 or email nmartinez@idc.com. Alternatively, please contact your local IDC office or visit www.idc.com.

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