EMEA Server Revenue up 11.4% in 1Q11; Strongest Growth in Four Years, as Market Recovery Continues Driven by x86 Demand, says IDC 

London and Prague, June 1, 2011. According to IDC's (International Data Corporation) EMEA Quarterly Server Tracker, server revenue grew by 10.8% in the first quarter of 2011 (1Q11) in EMEA, reaching double-digit growth for the first time since 1Q07. Total revenue for EMEA reached $3.5 billion. Unit shipments grew by 2.6%, after nearly 580,000 units were shipped. The strong revenue performance indicated good traction of high-end, and particularly, midrange servers priced between $25K and $249K. High-end servers enjoyed healthy revenue growth of 13.2%, with midrange servers growing faster, up 15.3% year on year. Revenue from volume systems grew by a relatively modest 9.2% year on year.

x86 servers were the main market engine again, with 66.6% of total revenue. x86 system sales reached $2.3 billion, against just $1.1 billion for non-x86 boxes. Industry standard servers have been the dominant technology in the EMEA server market since 1Q07, making this the 17th consecutive quarter in which this technology surpassed sales of enterprise systems running on CISC RISC EPIC processors. Volume server revenue reached 65.8% share of the total market. 98.6% of high-end revenue came from non-x86 systems, with 50.2% coming from CISC-based mainframes, 29.4% from RISC Unix servers, and 19.1% from EPIC systems running on Itanium processors.

"The server market landscape is undergoing a transformation driven by increased demand for datacenter optimization to support virtualization, automation and cloud strategies. Cloud projects are set to profoundly change European server environments, as more customer sites adopt cloud-based infrastructures in 2011," said Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA.

"Despite the healthy revenue performance of the mainframe, up 46.8% year on year, there was a significant decrease when compared with the 62.2% annual growth rate seen in the previous quarter," said Beatriz Valle, senior research analyst in the Enterprise Server Group for IDC EMEA. "The RISC Unix market continued to weaken. Recent technological developments on x86, both at the chip and systems levels, which are boosting the reliability, availability and security features of those environments, are set to accelerate migrations from Unix platforms."

Blade Server Segment

"Once more, blade servers represented an area of increased spending (+18% YoY, versus +11% YoY market average) for EMEA customers. Non-x86 blade platforms delivered another strong quarter, with revenue doubling year on year to $93 million (13% of blade spending), while IDC observed slower growth in x86 blade platforms (1% annual unit growth, 10% annual revenue growth), which performed roughly on average with x86 spending," said Giorgio Nebuloni, senior research analyst in the Enterprise Server Group for IDC EMEA.

"A number of disruptive factors — including virtualization, a new player in the arena in the form of Cisco, and the rise of new scale-out rack platforms — are resetting the role of blade servers. Their preponderance is declining in technical computing and HPC, but increasing to support traditional enterprise workloads and virtualized environments, where integrated, high-value hardware and software sales are becoming prevalent."

Emerging Markets

According to Jiri Helebrand, senior research analyst for IDC CEMA, "1Q11 server revenue in Central and Eastern Europe, the Middle East, and Africa (CEMA) grew by 22.2% year-on-year, representing the strongest performance recorded for the last three years. The Central and Eastern European (CEE) subregion was the main contributor, up by 30.9% to $383.2 million, benefiting from double-digit growth rates in Russia, the Czech Republic, and Poland, while the Middle East and Africa (MEA) subregion increased by 15.0% to $405.9 million, driven by demand from African countries investing in IT infrastructure.

"Hardware demand is on the rise across CEMA, due to investments in datacenter retrofitting, expansion, and projects around cloud computing offerings, and both x86 and non-x86 segments displayed double-digit growth. Although the major driving force behind the increase in the CEMA region was interest in x86-servers, as this segment displayed annual growth of 29.8% in revenue, benefiting from solid sales of blade and rack-optimized machines due to investments in server capacity and in consolidation projects. telecommunications and finance companies were among top spenders in 1Q11."

Top Server Market Findings

• X86 servers reached $2.3 billion in revenue and grew 11.9% year on year. Non-x86 revenue enjoyed strong growth of 8.6% year on year, with revenue reaching $1.1 billion. This was the strongest year on year growth rate for non-x86 since the second quarter of 2008.

• Mainframe (CISC-based servers) revenue increased 46.8% year on year but decreased 34.1% quarter on quarter, indicating mainframe refresh activity is the result of residual pent-up demand from the corporate space before activity slows down again in 2H11. RISC servers declined 7.0% year on year, but EPIC servers grew slightly by 2.5%.

• Volume servers priced below $25K experienced moderate annual growth of 9.2%. The vast majority (99.4%) of volume servers shipped were x86 systems, whereas midrange servers displayed a more balanced spread between the x86 and non-x86 segments (39.4% and 60.6% of units respectively). High-end systems, up 28.9% annually, were predominantly non-x86 (98.6% of all shipments).

• By operating system, Windows continued to hold the largest market share, with 49.4% of the total revenue in EMEA. Unix was the second largest after reaching 21.0% of the market. Linux edged closer to Unix, with a revenue share of 16.9%. Of the four main operating systems, only Unix displayed flat growth, with Windows, Linux and z/OS up by 12.8%, 8.6% and 68.3% year on year.

• All form factors grew, indicating that market demand is diversifying as organizations look into different environments based on hybrid architectures. As usual, blade revenue growth was above the market average, up 17.3% year on year, but it was nearly matched by rack-optimized systems (up 9.5% annually) and non-rack servers (up 9.2% on the back of mainframe demand).

Vendor Highlights, First Quarter of 2011 (1Q11)

• HP continued to hold its top position for the 13th consecutive quarter in EMEA, on the back of strong traction of ProLiant systems sales, up 12.4% year on year after selling $1.2 billion in EMEA. Sales of non-x86 were flat year on year, generating in excess of $200 million.

• IBM gained market share in 1Q11 on 1Q10, increasing its slice of the EMEA revenue by 4.8 percentage points thanks to sales of CISC servers, up by a healthy 68.3% in 1Q11 on 1Q10 after the successful transition to System z, which was 77.9% of the total CISC revenue in the quarter.

• Dell's revenue share remained stable year on year, with sales of PowerEdge servers up 9.9% in 1Q11 on 1Q10.

• Oracle continued to generate most of its sales from its SPARC Enterprise family of RISC Unix systems, with 72.5% of the total revenue for this vendor. Its x86 servers turned in more than $50 million in 1Q11.

• Fujitsu continued the focus on its x86 line of Primergy servers, which generated 65.0% of the total revenue for this vendor in 1Q11, with sales up 2.3% year on year. Fujitsu's BS2000 mainframes generated 33.3% of its total revenue for the quarter.

Top 5 Corporate Family, EMEA Server Systems Factory Revenue, First Quarter of 2011 (Revenues in Millions) 

Vendor 1Q11 Revenue 1Q11 Market Share 1Q10 Revenue 1Q10 Market Share Revenue Growth 1Q11/1Q10

HP $1,451 41.2% $1,318 41.5% 10.1%

IBM $1,009 28.7% $760 23.9% 32.8%

Dell $411 11.7% $374 11.8% 9.9%

Oracle $241 6.9% $301 9.5% -19.9%

Fujitsu $197 5.6% $210 6.6% -6.0%

Others $212 6.0% $216 6.8% -2.1%

Total Market $3,521 100.0% $3,178 100.0% 10.8%

Source: IDC's EMEA Quarterly Server Tracker, May 2011

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.

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