x86 server revenue reached $2.1 billion, a decline of 4.5% year on year in 2Q13, a sharper decline than in the previous quarter, when revenue was down 1.5% annually. Non-x86 server revenue was virtually flat, down just 0.1% annually, in stark contrast with the 34.8% yearly decline during the first quarter of 2013. x86 server sales reached 71.3% of the total in EMEA, down from 80.4% in the previous quarter, when industry standard servers reached the highest market share ever recorded by IDC. Volume and midrange servers were down 6.4% and 5.6% year on year respectively, while sales of high-end systems increased 7.5% in the same period. Server class performance was consistent with the direction the market took this quarter, driven by a temporary spike in mainframe refreshes.
"With new products and refreshes coming up in 4Q13, x86 server spending has proceeded at a slower pace in the quarter, especially in the volume SMB sector," said Giorgio Nebuloni, research manager, Enterprise Server Group, IDC EMEA. "Vendors are battling for share in that part of the market - typically distribution-driven - as new entrants continue applying pressure on established players. Stabilization and some growth in x86 spending is expected for 2014, when local cloud service projects will combine with broader refreshes and a less negative macroeconomic scenario."
"Mainframe performance enjoyed quite an uptick this quarter, driven by strong demand in Western Europe, particularly the U.K., France, and Germany, as well as pockets in other countries of EMEA, such as South Africa and Poland," said Beatriz Valle, senior research analyst, Enterprise Server Group, IDC EMEA. "This trend was driven by demand for refreshes on previous-generation mainframes. With the release of the zEC12 in 3Q12, focusing on security and analytics, IBM introduced important updates to keep the platform relevant. Mainframes are increasingly being deployed on Linux operating systems and high-availability needs remain a primary market engine in some industries."
"Central and Eastern Europe, the Middle East, and Africa [CEMA] combined continued to record negative growth. Server revenue reached $721.97 million, declining as much as 10.5% year on year in 2Q13 with both x86 and non-x86 servers seeing contraction," said Jiri Helebrand, research manager, IDC CEMA. "The Central and Eastern Europe [CEE] subregion was down 20.4% to $363.42 million. Continued weakness in the Russian market is weighing heavily on the CEE region, which saw the weakest performance over the past three years. An increase in demand was seen in Poland, Czech Republic, and Hungary thanks to several large upgrades of existing server infrastructure in the financial sector. The Middle East and Africa [MEA] subregion showed resilience despite the geopolitical tension, and server sales increased 2.3% year on year to $358.54 million. A focus on technological transformation and improving IT infrastructure is supporting server demand in countries such as Kenya, Nigeria, and Pakistan, which are all growing at double-digit rates. The Turkish server market also grew in double digits, benefiting from strong demand in the government and financial sectors."
Modular Server Highlights
Blade revenues declined to $574 million in EMEA, which means a 2.4% drop year on year and 4.6% quarter on quarter. Although the blade market has not fully recovered yet, the decline is smaller than in previous quarters, and market performance is improving slowly but continuously. The recovery was partly driven by large HPC projects for universities in Germany and the U.K., as well as the public and financial sectors in France.
Density optimized servers showed revenue growth of 68.0% year on year, and accounted for $98 million of revenue. Although this category continues to grow at high-double-digit rates, there was a significant slowdown with a quarterly decline of 20.9%, which is partly down to the previous quarter's record-level growth rate of 103% annually, which cannot be maintained in the longer term.
"The share of modular server shipments in EMEA increased from 18.9% in 2Q12 to 20.5% in 2Q13. While the share of blade shipments remained stable, the moderate growth in the density optimized segment has been driven by large enterprises, the public sector, and cloud service providers' hyperscale datacenter upgrades in Western Europe, with the highest increase seen in France, the Netherlands, and the Nordics," said Andreas Olah, research analyst, Enterprise Server Group, IDC EMEA. "Server density is increasing in the blade and density optimized segment, which is driven by the need for lower power consumption and less datacenter floor space required while maintaining performance. While modular shipments grew annually in double to triple digits in France, Spain, the U.K., Benelux, and the Nordics, there was a temporary decline in Germany, Austria, and Ireland, a trend in line with an overall drop in server shipments in these countries."
Overall Server Market Standings by Vendor
- HP held the number 1 spot in 2Q13, despite annual revenue declines of 13.2% due to weaker demand for x86-based ProLiant servers, which were challenged by competitive pricing pressure and continued weakness in Itanium-based Integrity server revenue.
- IBM held the number 2 spot with a 27.8% share for the quarter, with a slight factory revenue decrease of 1.3% compared with 2Q12. Demand for IBM's System z systems grew 59.6% annually, although the System x family generated more revenue for the vendor.
- Dell maintained third position and was the only vendor in the top 5 to see revenue increases, with sales growing 7.9% year on year and a 1.5 percentage point increase in market share year on year, helped by strong demand from its density optimized datacenter solutions business.
- Oracle was in fourth place, with revenue flat year on year, after benefiting from growth in sales of the Engineered Systems family as well as refreshes on its SPARC Enterprise line.
- Fujitsu was in fifth place, with a decline of 6.1% annually, and enjoying good performance of its BS2000/OSD family of mainframes, whose sales were up 11.2% year on year.
- x86 revenue share reached 71.3% ($2.1 billion) of the market in 2Q13, down 4.5% in EMEA overall, and with annual revenue growth of 5.3% in the Middle East and Africa. Non-x86 revenue increased 9.8% in Western Europe, with flat revenue performance for the whole of EMEA. CISC-based mainframes saw spectacular revenue growth of 46.3% in 2Q13, whereas the rest of the legacy CPUs, RISC and EPIC based systems, declined by a combined 17%.
- Windows reached a share of 49.8% of total market revenue ($1.5 billion), and declined 6.3% yearly. Linux overtook Unix for the fifth consecutive quarter, with 21.3% of the total market, and growing slightly by 0.5% annually.
- Rack servers were the leading form factor, with 50.9% ($1.5 billion) of the total market, and annual declines of 6.6%. Tower servers maintained a stable market share year on year, down 2.6%, a similar rate of decline as blades, down 2.4%. Density optimized systems enjoyed double-digit growth (68.0%), albeit from a very low share (3.3% of the market).
IDC's Server Taxonomy maps the 11 price bands in the server market into three price ranges: volume servers, midrange servers, and high-end servers. The revenue data presented in this release is stated as factory revenue for a server system. IDC presents data in factory revenue to determine market share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS and upgrade units sold through direct and indirect channels, and includes the following embedded server components: frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software, and initial internal and external disk shipments.
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.