European server sales hit rock bottom

Server sales are declining

European server sales have dropped to the lowest level ever recorded by analyst IDC.

Research and analyst firm IDC has reported the lowest levels of server revenue it has ever seen in the second quarter of 2009.

According to IDC’s Quarterly Server Tracker for Europe, Middle East and Africa (EMEA), server vendor revenue in the second quarter of 2009 reached $2.9bn (£1.8bn), 35.8 per cent down on the same period last year, with the number of servers shipped dropping below half a million, 33.9 per cent down on 2008.

"Conditions remain tough because customers have been limiting IT spending to the bare essentials to keep their IT infrastructure running, and this has negatively impacted hardware investment," said IDC analyst for European Systems and Infrastructures Solutions Beatriz Valle.

"IDC sees signs of stabilisation this quarter, including modest growth in average selling prices and quasi-flat quarter-on-quarter revenue decline."

Virtualisation on x86 systems was seen as the growth engine by server vendors hoping for a traditionally strong fourth quarter, according to the research. But IDC pointed out that it would take much longer than that for EMEA server revenue to match the peak of $5.4bn (£3.3bn) seen in the fourth quarter of 2007.

IDC confirmed the market trend towards x86 servers, which outperformed non-x86 servers, taking 52.3 per cent of total revenue, declining 33 per cent from last year. This compares with a steeper 38.6 per cent decline for non-x86 systems.

IDC's European Systems and Infrastructure Solutions research analyst Giorgio Nebuloni said that blade systems are expected to be less affected by the economic downturn, due to increased consolidation within budget-constrained companies.

"[Vendors are] escalating the number of integrated, richly configured solution blocks based on a scalable layer of blade servers, in an attempt to decommoditise the upper end of the x86 business," he said.

Windows and Linux-based systems showed similar annual declines of about 32 per cent, but Windows was the only main operating system whose market share increased both quarterly and annually. Operating systems running on non-x86 hardware were worst hit, with Unix system revenue below $1bn (£611m) for the second consecutive quarter, with revenue down 38.7 per cent annually.

HP was EMEA's top server vendor for the sixth consecutive quarter, with ProLiant server sales worth around $700m (£428m), 72 per cent of its revenue, up from 66.7 per cent in the same quarter of 2008.

In second place was IBM continuing the transition from System p to Power systems, and growing its market share 1.4 per cent. Power systems revenue edged closer to $400m (£244m), accounting for 41.9 per cent of the vendor’s total. However, mainframe revenue dropped by nearly half, down 46.7 per cent annually.