IDC: EMEA Server Revenue Expected to Grow 2.4% in 2010

According IDC's EMEA Quarterly Server Forecast, customer server revenue will pick up slightly in 2010 as the market recovers from the recession in 2009. IDC expects a modest increase of 2.4%, set against the weakest server figures recorded by IDC in 2009. Customer revenue is not expected to return to pre-recession levels, which peaked at $19 billion in 2007, during the forecast period. EMEA server revenue CAGR for 20092014 is expected to be almost flat, weighed down by 2009 figures, at 0.3%, and with shipment CAGR of 4.9%.

"The overall economic environment is picking up after a prolonged recession", said Nathaniel Martinez, director of IDC European Systems and Infrastructure Solutions. "4Q09 marked the definitive turn to industry standard technologies, and corporate clients that were typically customers of enterprise servers will be considering x86 technologies for an increased number of workloads in the forecast period."

"Hardware based on x86 microprocessors with higher performance and RAS features, coupled with virtualization and software management and automation, will become an increasingly appealing proposition to corporations that were historically buyers of non-x86 systems", said Beatriz Valle, IDC research analyst for European Systems and Infrastructures Solutions.

Blade Market

IDC expects that growing market segments such as blades will mature further in 2010 through development of blade-specific solutions and reference architectures. "Blades will remain a major opportunity, with CAGR for 20092014 forecast to be 20.5% and 13.9% for units and revenue respectively. Bladed servers will grab over 33% shipment share in 2014, representing a 28.5% revenue share. In 2009, this form factor was the largest source of margins in the x86 market", said Giorgio Nebuloni, senior analyst for European Systems and Infrastructures Solutions.

Forecast by Subregion

By subregion, Western European revenue is expected to grow 2.1% and shipments 6.2% Y/Y in 2010, with a more balanced revenue/unit ratio than CEMA, partly due to higher sales of RISC Unix in more mature geographies. CAGR for 20092014 is anticipated to be negative in Western Europe, at -2.8%.

"In the CEMA region, recovery in 2010 is expected to benefit from strong demand in the less mature markets of the Middle East and Africa, and from a gradual recovery in Central and Eastern Europe. As a consequence, 2010 revenue will grow faster in CEMA this year, up 3.4%. Shipments will grow 12.2% annually, as multicore offerings spark a pricing war at the lower end. CAGR for 20092014 in CEMA will be 8.5% and 13.1% for revenue and units", said IDC CEMA Systems Research Director Stefania Lorenz.

EMEA Quarterly Server Tracker, 4Q09

The latest IDC EMEA Quarterly Server Tracker shows that EMEA revenue in 4Q09 reached $3.9 billion, down 10.3% annually. 600,000 servers were shipped in 4Q09, a decline of 5.3% on 4Q08. Despite 4Q09 being the sixth consecutive quarter of negative annual growth, the speed of the revenue declines has eased with every quarter after 1Q09, when the server market saw the weakest market figures ever recorded.

Annual revenue declines were in the double digits in every quarter of 2009, but the lesser decline of 10.5% this quarter signals a strong recovery compared with 3Q09, when revenue dropped annually by 25.7%.

For the full year 2009, EMEA server revenue declined 26.4% to $12.8 billion and the number of servers shipped went down 23.6% to 2 million units. Quarter on quarter, revenue was up by a strong 33.9%, with shipments up by 26%, a positive market indicator that average selling prices are going up, and commoditization is not accelerating.

x86 technologies were the main market driver, with $2.3 billion, or 58.4% of total sales in EMEA. The figures represent a growth of 7% annually and 32.5% quarter on quarter, confirming that high-end x86 technologies are driving server refreshment sales that had been postponed due to recessionary pressure on IT budgets. Sales of non-x86 technologies have traditionally been strong in the fourth quarter of the year, but revenue in that segment fell by 27.4% in 4Q09 on 4Q08, to $1.6 billion.

Emerging Market Dynamics

By subregion, geographies in the Middle East and Africa (MEA) continued to show the strongest performance, with revenue declining by only 3.4% annually, while in the Central and Eastern European (CEE) countries the revenue drop was much more pronounced, at 14.3% year on year. Market results in Western Europe were more in line with the market average, with revenue declining by 10.8% year on year. In 4Q09, 10% of the total EMEA server revenue was produced in the MEA subregion.

Top Server Market Findings:
- By form factor, blades led the market with annual growth of 16.3% and a percentage of total revenue of 16.2%, nearly 4 percentage points higher than in the same quarter of 2008. Racks held up well with a slight decline of 2.4%. Standalone server sales, which include both the lowest end of the market as well as mainframes, fell 26.8% year on year.
- Windows and Linux were the only main operating systems to experience revenue growth, by 7.2% and 4.1% respectively, year on year. Windows held the lion's share of the market with 42.8% of the total, way ahead of Unix, the second most important, which had 27.3% of total sales, but suffered an annual decline of 24.7%.
- By server class, volume server revenue growth was sharpest, up 5.3% annually, while midrange server sales were down 3% and the high-end segment of the market suffered the hardest blow, down 37.6% annually. This trend is consistent with the x86 dynamics shown in the quarter, as most market growth came from the x86 segment, dominated by volume servers.

Server Vendor Highlights:
- HP was the leading vendor in EMEA in 4Q09 and for the full year 2009. Sales of its x86 Proliant servers generated more than $1 billion in 4Q09 alone. Integrity server revenue went up 13.7% quarter on quarter, and Non-Stop Integrity maintained similar revenue levels on a quarterly basis.
- IBM increased its share of the market by more than one percentage point for the full year. In 4Q09, revenue for the x86 family System x, up 33% year on year for the quarter, surpassed RISC Unix sales for the first time for this vendor. Power Systems revenue followed closely with 37% of its total sales.
- Sun's SPARC Enterprise systems held up well, growing quarter on quarter despite an annual revenue decline, and Sun x86 sales grew 32.2% annually and 66.2% quarterly. The server market is now waiting for Sun's next move now that it has been taken over by Oracle.
- Dell's PowerEdge server revenue reached over $300 million in 4Q09. The vendor is currently investing heavily to develop cloud and automation capability offerings to compete in the converged infrastructure market in 2010.
- In 4Q09, Fujitsu saw the lowest annual revenue declines of all the major vendors, with server sales down by only 4.7%. Its x86 Primergy servers were its top revenue generating line, with 58.7% of total sales in 4Q09 and up 14% quarter on quarter, followed by its BS2000 mainframes.

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