7 Dec 2011 Prague - The EMEA server market displayed flat growth in 3Q11, with revenue of $3.2 billion, up 0.6% annually and 546,883 units shipped, 1.0% less than in the same quarter last year. Revenue performance in the Western European subregion was below the EMEA average, with server sales down 1.4% annually. This was reflected in a shrinking Western European revenue share of the overall EMEA server market, which generated 74.8% of total sales, the smallest percentage since IDC records began. IDC believes that the current fluctuations of the exchange rate as the euro devaluates in the currency markets and more specifically against the dollar had a significant effect on server system revenue in Western Europe.
Growth was subdued in the biggest European economies, with France and the U.K. growing by1.6% and 2.1%, respectively, and Germany recording a slight decline in revenue, which was down 3.6% year on year. By technology, x86 servers were the main market engine, with revenue reaching $2.3 billion, up 3.5% year on year, and unit growth flat (down 0.7%). 98.3% of all servers shipped were x86 systems. Non-x86 server revenue declined by 6.5% annually after sales fell short of the $1 billion mark at $875.5 million. Unit shipments fared worse, down 13.9% annually with just above 9,000 servers shipped.
"The server market is displaying signs of deceleration as macroeconomic conditions worsen worldwide. After a very strong second quarter that exhibited the fastest rate of annual growth in seven years, the sluggish pace of growth in the third quarter indicates that, although it is early to assess the full impact the eurozone crisis will have in the Western European server market, strict fiscal policies and a slackening of private demand have already had a significant dampening effect on sales of systems", stated Beatriz Valle, senior research analyst in the Enterprise Server Group for IDC EMEA.
"Looking at the demand side, IDC observes that virtualization will continue its penetration of data centres across sectors and countries in Western Europe. Demand for virtualization in the SMB segment and emerging markets is set to accelerate in the coming quarters. European customers are also increasingly turning their attention to cloud technologies, where IDC expects much stronger adoption patterns in the coming quarters", stated Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA.
In response to market demands, vendors have developed new server designs to address the unique needs of customers of large-scale, Web 2.0 hosting and HPC environments. To reflect evolving market dynamics, IDC is introducing a new form factor denominated "hyper-scale servers" in the 3Q11 edition of the EMEA Quarterly Server Tracker. Hyper-scale servers are designed for large scale data centre environments where parallelized workloads are prevalent. The form factor serves the unique needs of these data centres with streamlined system designs that focus on performance, energy efficiency, and density. These servers forego the full management features and redundant hardware components found in traditional enterprise servers. Instead, these capabilities are accomplished primarily through software.
Hyper-scale servers generated $53.2 million in revenue for OEMs in 3Q11, with units increasing by 20.9% YoY to reach 15,176 servers shipped. Hyper-scale servers remain a relatively small segment of the market in EMEA, where they represent around 1.7% of all server revenue and 2.8% of shipments. The majority of the shipments in this category are still typically linked to few large deals in HPC and Cloud environments in Western European countries, although some vendors are trying to make this a run rate business by positioning hyper-scale products as a go-to-platform for small hosters and departmental high-performance clusters.
Despite hyper-scale servers eroding some demand in HPC and virtualization driving strong consolidation in traditional enterprise datacenters, blade servers outpaced the market in 3Q11, with mid-teen year-on-year growth in revenue and 2.2% year-on-year increase in units.
"This was once again the result of sustained demand in emerging markets in the Middle East and Eastern Europe, where x86 and non-x86 blades posted double digit unit growth and 34% revenue growth year over year. Western European demand was more subdued, with units slightly down year on year and most of the revenue improvement (+6% year on year) driven by a shift of non-x86 platforms onto blades, rather than organic growth in x86 sales. Western European average selling value (ASV) in euros of x86 blades was flat QoQ, as vendors sacrificed some margins to keep volumes going. Cisco continued gradually building out customer base and share, accounting for around 7% of the x86 blade spending in EMEA in the quarter", stated Giorgio Nebuloni, senior research analyst in the Enterprise Server Group for IDC EMEA.
Central and Eastern Europe, the Middle East, and Africa combined (CEMA) continued in positive growth trend in 3Q11 despite slowing economic conditions across the EMEA region. Server revenue totalled $813.24 million which represented 7.0% year-on-year growth. Large corporate accounts as well as governmental entities were the major source of server purchases across the CEMA region.
"Central and Eastern Europe (CEE) was the only region in EMEA to enjoy growth. Strong server demand in countries such as Poland, Russia and the Czech Republic contributed to an overall increase of 15.1% year on year, reaching a total market value of $457.3 million. Traditionally slower business activity in 3Q11 as well as political uncertainty in the Middle East and North Africa impacted server sales in Middle East and Africa (MEA) which declined by 1.8% year on year, after generating revenue of $355.9 million. Israel and Turkey were among the countries with positive growth, benefiting from demand from government and banking sectors," said Jiri Helebrand, senior research analyst, IDC CEMA.
x86 servers, up 3.5% annually, took 72.9% of the total revenue. Non-x86 server revenue was down 6.5%, equivalent to 27.1% of total sales in the EMEA server market for 3Q11.CISC revenue was down 7.9% year on year, a significant decline especially after taking into account the strong performance last year, mainly due to Western European refresh activity on the back of strong road map releases. CISC revenue reached $231.6 million in 3Q11. EPIC's decline accelerated, down 31.2% year on year and now around 5.4% of total EMEA revenue. RISC performance gathered momentum, up by 9.1% annually to $468.5 million, benefiting from pent up demand.
Windows continued as the leading operating system with 53.5% of revenue ($1.7 billion), although the pace of annual growth has slowed to 3.7% as SMB spending slumped. Linux was the fastest growing of the main operating systems, with demand positively impacted by strong x86 server deployments, and revenue up 5.1% year on year. Unix was down 5.8% and z/OS suffered a strong decline of 14.7% due to the cycle-driven slowdown in mainframe sales.
Blade systems enjoyed strong growth, with revenue up 14.6% annually. This was the only form factor to grow in the double digits, since rack systems grew by 4.0% and pedestal servers declined by 12.3% on the back of a slackening in mainframe demand.
Volume server revenue remained stable, with flat growth of 0.4%. Midrange servers generated $468 million, growing 15.9% annually and benefitting from the upsurge in RISC sales. The high end was negatively impacted by the slowdown in the mainframe segment. As a consequence, revenue was down 8.7% year on year to $558.8 million for the high-end segment.
HP continued to hold the top position in the EMEA server market for the 15th consecutive quarter, with ProLiant servers generating $1.1 billion, equivalent to 48.2% of all x86 server sales in 3Q11.
IBM enjoyed strong RISC results, with revenue of $263 million, and the x86 server lines xSeries and System x generated a significant 49.3% of the vendor's total sales for the quarter.
Dell increased its market share by 1.8 percentage points in a quarter of very subdued growth for its competitors, spearheaded by x86 market demand, with sales of PowerEdge servers reaching $427 million.
Like Dell, Oracle saw its share of the total market increase by a significant 1.7 percentage points, with 3Q11 figures boosted by simultaneity with the company's fiscal-year end, and overall revenue driven by sales growth of the vendor's RISC servers, up 30.9% annually.
Fujitsu maintained a stable market share in year-on-year comparisons, with performance supported by solid sales of its x86 (Primergy) server line, accounting for 67.4% of the vendor's revenue.