After experiencing two and half years of growth, the server market in the first quarter reported a decline worldwide, marking the second consecutive quarter of revenue decline. The server market in Europe, the Middle East, and Africa (EMEA) were the worst hit as a year-over-year factory revenue declined 4.3 percent, according IT research company IDC’s EMEA Quarterly Server Tracker findings.
Sales of servers in EMEA totaled USD 3.8 billion, down from USD 4.9 billion in the year-ago quarter. Shipments declined by 8.8 percent year on year, reaching 567,660 units compared to the record 676,849 units experienced in the same quarter a year ago.
"The data confirms that there is a trend towards the commoditisation of the server market, with lower prices resulting in smaller profit margins," said Beatriz Valle, research analyst, IDC European Enterprise Server Solutions.
"Volume systems are offering improvements in performance and scalability, becoming a viable option for a wider range of vertical markets. Companies are modifying their IT spending patterns, as technological improvements make it possible to strategically plan server purchases to address specific business needs, and to enhance existing hardware rather than buying new systems," Valle added.
The Central and Eastern Europe server market recorded the strongest growth in the region for the fourth consecutive quarter, displaying annual growth rates of 13.9 percent and 28.1 percent in factory revenue and shipments respectively.
"These strong results reflect an increase in server demand from vertical markets such as finance, while private and public investments in this geopolitical area continue to fuel growth," said Stefania Lorenz, program manager, Hardware and Systems group, IDC.
The Middle East and Africa benefited in first quarter from channel and vendor backlogs that had contributed to worse-than-expected results during the previous quarter. Factory revenue grew at an annual rate of 12%, and shipments grew 9 percent year over year.
Following the same pattern seen throughout 2005, annual growth in the Western European region was the slowest, with a decline of 7.1 percent in factory revenue and a growth rate of 6.4 percent in shipments.
Despite an increase in server shipments, the drop in factory revenue indicates that volume servers, which are largely benefiting from replacement cycles, are failing to alleviate the slowdown currently suffered by midrange and high-end segments.
Fig. 1: Top 5 Vendors EMEA Server Market Factory Revenue
HP gained the leadership position in the EMEA server market from IBM in
The quarter; HP's revenue totaled USD 1,276 million, and IBM's USD 1,179 million. Sun Microsystems was third in revenue terms with USD 406 million, recording a decline of 1.5 percent from a year ago, followed by Fujitsu Siemens. Dell also generated revenue growth, narrowing the gap with Fujitsu Siemens this quarter.
Key findings of the research are:
- x86 servers now enjoy a revenue market share of 46.6%.
- Unix led the EMEA server market with 38% of the total market in factory revenue
- Blades continue to evolve alongside new technologies, and offerings such as Itanium-based models are driving rapid growth in market share
- AMD processor-based systems continued to benefit from increasing
acceptance in the marketplace by the major vendors as well as the channel
According to IDC's, worldwide server market declined 1.9% year over year to USD 11.9 billion in the first quarter of 2006.
According to Matt Eastwood, program vice president of Worldwide Server Research at IDC while customers continued to invest in new infrastructure in the quarter, IT spending patterns are evolving and these shifts are clearly having an impact on the server market said Matt Eastwood, program vice president of Worldwide Server Research at IDC.
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