Resilient EMEA Server Market Defies Gloom in 1Q08 as Virtualization Spearheads Revenue Growth of 4.8%, Says IDC

LONDON and PRAGUE – May 29, 2008 – According to IDC's Quarterly Server Tracker, the

EMEA server market resisted the tough economic environment well in 1Q08, boosted by a weak dollar/euro exchange rate. Vendors with a strong x86 portfolio performed best, and EMEA factory revenue reached $4.4 billion, up 4.8% over 1Q07.

Shipments went up 8.7% to 680,000 in the same period, showing a slight imbalance in the ratio of unit to revenue and indicating weaker average prices. As usual, Central and Eastern Europe and the Middle East and Africa were the fastest-growing regions, with revenue up 11.7% and 16.4% respectively. However, Western Europe also performed well, growing revenue 2.8% over the same period of the previous year.

According to Nathaniel Martinez, director of European Enterprise servers at IDC, "The strong results indicate that virtualization is acting as a driving force in the market, as end users discover its possibilities in management and automation. The technology is being used to tackle server sprawl and has particular relevance in the fields of high availability and disaster recovery for SMBs, a segment that server vendors are fiercely aiming at."

Beatriz Valle, research analyst at IDC, said: "The server market is now immersed in a period of disruption and is displaying remarkable resilience in both the value and volume areas. Processor technologies and form factors such as multicore and blade are pushing virtualization to the forefront, and vendors are playing catch-up to sell solutions to the midmarket that exploit these technologies. Green computing will also be a segment to watch."

"Revenue in the CEMA region rose in the double digits year on year for the fifth consecutive quarter, reaching a total value of $850 million, and no sign of slowdown is expected in the foreseeable future. In contrast to the more mature markets of Western Europe, this quarter, CEMA maintained a stronger appetite for the midrange and volume server, thanks to an increase of new business sites and to the SMB market," said Stefania Lorenz, IDC systems research director for the CEMA region.

IDC Key Server Market Findings

Windows took a strong turn and claimed an outstanding revenue share of 37.4% of the EMEA market, signaling an earlier-than-expected uptake of Windows Server 2008. This figure looks even more striking when set against the meager 31.8% share achieved by Unix.

Linux growth was slightly lower than usual, with sales reaching around $600 million. Sales of the mainframe operating system z/OS grew at the healthy rate of 11.8% annually, but this high growth rate must be taken in the context of what is considered to be a very benign time of the year for this operating system.

Sales of x86 servers with 64 bits grew 13.5% annually. Both RISC and CISC slightly decreased, confirming the slowing market trend of non-x86 CPU types. However, RISC continues to take up a healthy 29% of the total revenue. In contrast, Itanium-based EPIC servers grew 32% annually, reaching $389 million, and are poised to cross the half-billion revenue mark in the next few quarters, confirming an industry trend forecast by IDC in the middle of this decade.

Volume servers were the main market driver, establishing a trend of downward pressure on prices, as cheaper boxes took 52.8% of the revenue. This indicates that customer behavior is now polarized between midsize companies that can rely on scalable x86 servers for most workloads, and enterprises that have requirements that still demand the use of high-end systems, which grew 10.9% annually.

Sales of blades are now showing what is, by all standards, a staggering annual growth of 53.1% in revenue, while non-rack servers retained their market share of 47.6% thanks to the consistency of their popularity in the SMB segment.

Opteron sales grew 6.1% annually as the market awaits the results of the ramp-up from the recently released servers by HP, Dell, and Sun running on AMD's quad-core chips.

Server Vendor Highlights

HP's lead over IBM was just above five percentage points. The vendor continues to successfully manage the transition from the high-end 9000 and Alpha families to Integrity, a product that claimed nearly a quarter of the vendor's sales. Meanwhile, ProLiant hovered above the $1 billion mark for the second consecutive quarter and for the third time in history.

Sales of IBM servers went up 1.9% in 1Q08 over 1Q07 thanks to the excellent performance of its mainframes, which had revenue growth of 11.8% over the same period. The vendor now has a new product family called the Power System, the boxes of which only run on POWER6 chips.

Sun continued to benefit from the strong uptake of its SPARC Enterprise line, which saw its revenue increase by more than 300% to nearly $200 million.

Dell enjoyed outstanding growth of 21%, with the full results of its channel strategy still in the early stages of development.

Fujitsu Siemens had a great quarter and continued to ride the x86 wave with good Primergy performance. However, it was the sales of its high-end servers BS2000/OSD that had a stellar growth of 33.6%, a sign that the vendor is balancing its product mix.

Top 5 EMEA Server Vendors 1Q08

(Revenue in Millions)

Vendor 1Q07 Factory Revenue 1Q07 Market Share 1Q08

Factory Revenue 1Q08 Market

Share Growth 1Q08 Over 1Q07

Hewlett-Packard $1,466 34.9% $1,540

35.0% 5.1%

IBM $1,261 30.0% $1,285 29.2% 1.9%

Sun Microsystems $480 11.4% $502

11.4% 4.7%

Dell $354 8.4% $428 9.7% 21.0%

Fujitsu Siemens $331 7.9% $375 8.5%

13.3%

Other $312 7.4% $274 6.2% -12.1%

Total market $4,204 100.0% $4,404

100.0% 4.8%

Source: IDC, 2008

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