Emea Server market down 10.5% in revenue

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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

LONDON and FRANKFURT, June 10, 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.

The news about server revenue illustrates a challenging operating environment as customers strive to manage their cost base, equally as cloud solutions become more mainstream clients that might have thought about purchasing their first server or purchasing more hardware might not be seeing their investment switched to more pay on use service models.  Opportunities still exist in upgrading to reduce your support and hosting costs, (the return on investment or pay back quoted is very impressive), as well as those areas where we see the application and the end to end hardware stack sold as a solution, the application as a service (database in a box) or infrastructure as a service (where I can pull a lever to build pre-defined servers in minutes.

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