According to the latest EMEA Server Tracker from International Data Corporation (IDC), factory revenue in the EMEA server market reached $3.7 billion in the fourth quarter of 2013 (4Q13), a decrease of 5.2% when compared with the same quarter of 2012. Shipments reached 606,548 units, representing a minimal 0.3% annual decline. The quarter-on-quarter performance displayed a more positive picture with moderate double-digit growth in volumes, which were up 13.2% and revenue showing strong growth of 28.5%.
The strong performance compared with the previous quarter is mainly down to seasonality, while the more significant decline in revenues than units compared with the same quarter last year is a sign of continuing price sensitivity at times of economic uncertainty and ongoing price competition, particularly at the lower end of the market.
EMEA server revenues reached $12.4 billion for the full calendar year 2013, which shows a moderate annual decline of 5.3%. The decline in unit terms was less significant at 2.7%, with over 2.2 million server units shipped in 2013. Despite the negative growth the market has improved compared with the stronger annual declines of 9.6% in revenues and 5.0% in units in 2012.
x86 servers totaled revenues of $2.8 billion, equivalent to 75.8% of the total value market (a decline of 5.7 percentage points quarterly and an increase of 6.6 percentage points annually). x86 industry standard servers achieved year-on-year revenue growth of 3.7% despite a slight decline in unit terms by 0.3%. "These figures underline the ongoing shift toward higher-end servers with upgrades to models that feature the latest-generation x86 processors," said Giorgio Nebuloni, research manager, Enterprise Server Group, IDC EMEA. "Capacity increases are also achieved through advances on the virtualization and management software side, making scale out less viable for on-premises datacenters in view of the high costs for energy, maintenance, and floor space rental. The trend is of course reversed in large B2C and B2B cloud facilities, which keep pushing the envelope on scale-out, commodity architectures."
Non-x86 sales only accounted for 6,250 units, with revenues of $888 million, which is a decline of 25.4% year-on-year — a slight increase on the drop of 22.2% experienced in the previous quarter, which also showed moderate revenue growth on the CISC side. In 4Q13, all non-x86 categories experienced double-digit declines, with a sharp 33.9% drop in CISC revenue. Although CISC systems are mainly used for specific use cases and tend to be less exposed to migrations to x86 than RISC, it is not surprising to see a decline following the strong third quarter in view of customers' refresh cycles. IDC believes that non-x86 technologies will continue to be eroded by migration to x86, though such migrations can be disruptive and risky for CIOs who also have several other priorities such as mobility and Big Data. Complex migration projects are usually moving very slowly and take several quarters of planning.
Western European Highlights
The Western European market continued to reflect the general trend toward x86 servers, which generated sales of $2.1 billion and showed moderate annual growth of 5.7%. Non-x86 server revenue totaled $710 million, a decline of 22.8%. Despite the encouraging performance on the x86 side, the overall Western European server market shrank 3.5% in 4Q13 compared with the same quarter in 2012.
"Large datacenter build-outs by global cloud service providers and social networks accounted for a significant chunk of growth in Western Europe that is most notable in the Nordic region and leads to a greater rise in shipments than revenues due to large deals of commodity servers at low prices from Asian ODMs as well as major server vendors," said Andreas Olah, research analyst, Enterprise Server Group, IDC EMEA. "However, several countries that saw larger shipments to mega-datacenter customers in the previous year experienced a decline this quarter including the Netherlands, Ireland, and Belgium.
"Strong growth was also observed in Greece and Portugal as these previously declining markets have started to pick up again. Moderate rises were observed in Germany in unit and revenue terms, while declines were seen in the U.K. and Spain. Interestingly, units grew double-digit in France and Italy, while revenue fell in these markets, driven by a surge in cheap tower servers and increasing price competition at the lower end."
CEMA Highlights
Central and Eastern Europe, the Middle East, and Africa (CEMA) server revenue decreased 10.3% year-on-year in the fourth quarter of 2013, posting $892.31 million. It was the sixth consecutive quarter of decline. Demand for both x86 and non-x86 was subdued due to economic weakness across the region with non-x86 servers declining as much as 34.1% year-on-year.
"The Central and Eastern Europe (CEE) subregion was down 13.3% to $494.24 million," said Jiri Helebrand, research manager, IDC CEMA. "Deferred demand due to upcoming refresh cycles and a lack of major deals in Russia and the Czech Republic added to weak year-end performances. Server sales in Poland were a bright spot thanks to investments in the government sector and demand from service provider companies. The Middle East and Africa (MEA) subregion declined 6.2% year-on-year to $398.07 million, impacted by weak performance in Saudi Arabia and Turkey. In contrast, African countries such as South Africa, Nigeria, and Kenya all recorded growing server revenue driven by the financial and telecommunications sectors."
Market Highlights
The strong decline in non-x86 revenues (-25.4% YoY) is mainly down to the continuous migration to x86 that has been evident mainly from 2H11 onwards. There is no sign of a recovery in this category, and the decline has been slightly slower in the full calendar year 2013 than in 2012 because many clients who want to migrate have already done so. Also, advanced automation and workload management tools increasingly allow for legacy environments to be seamlessly integrated, so there are fewer incentives to move away from mainframes today than there were one or two years ago.
By operating system, Windows held 51.6 % of the market, generating hardware spending of around $1.9 billion, down 0.6% year-on-year. Linux achieved a significant rise year-on-year, growing by 9.3% after generating sales of $832.8 million, and capturing less than a quarter (22.7%) of the total market. In contrast, Unix revenues declined 15.4% year-on-year, reaching sales of only $462.6 million on the back of weaker RISC system sales and lack of demand from new customers. z/OS revenues dropped sharply by 40.5% year-on-year to $290.0 million due to refresh cycles.
The market share of volume servers has declined moderately to 69.1% of total revenues, compared with the previous quarter (75.6%). Volume servers generated revenues of $2.5 billion and were the only category that achieved positive year-on-year revenue growth (3.7%). The midrange saw a moderate decline of 6.9% and generated revenues of $394.1 million, while the high-end contracted stronger than in the previous quarter by 26.3%, to $738.5 million, which is mainly due to a slowdown in mainframe sales and a downward trend in prices in RISC and EPIC environments.
From a form factor perspective, rack servers still account for over half of the market by revenue (52.9%), though declining moderately by 1.7% year-on-year. Towers or standalone servers once again suffered a sharp decline, down 22.1% year-on-year in revenue terms.
Blades continued their growth path (+9.4% year-on-year) following 7.1% growth in 3Q that put an end to the downtrend seen in previous quarters. In terms of revenue share of the total market, towers are back in second place (22.3%), slightly ahead of blades (21.4%). Density-optimized servers declined by 3.0% year-on-year as this previously fast-growing category matures. Their decline is down to a lower number of mega-HPC projects, as well as flattish growth in cloud environments. Also, IDC believes some large datacenter customers have started to review large-scale investments in this area to allow them sufficient time to test new ultra-dense models and the upcoming Atom/ARM architectures.
