European Server Market Swoons, Quite Predictably

Published: June 25, 2012

by Timothy Prickett Morgan

The box counters at IDC gave their overview of the server racket in the first quarter on a global basis a few weeks ago, and now the company has done a deep sort on its data and drilled into the data for the EMEA market. And man, it sure doesn't look good if Europe is any kind of leading indicator for the global economy and server sales are a kind of canary in the coal mine.

As The Four Hundred explained two weeks ago, the overall server market had a 2.4 percent revenue decline in the first quarter, falling to $11.81 billion, and across all types of processors, server shipments worldwide in the first quarter were up 2.7 percent to 2 million units. About 100,000 machines sold in the first quarter did not use X86 processors. That's it.

In the Europe, the Middle East, and Africa markets, factory revenues for servers selling in the region fell 11.9 percent to $3.1 billion (when translated into U.S. dollars) against a shipment decline of 3.8 percent, to 556,877 machines. IDC reckons that X86-based servers accounted for $2.2 billion and fell by 3.4 percent, so not even Xeon and Opteron machines were immune from the malaise. It has been 13 quarters or slightly over three years since X86 sales surpassed the aggregate system sales of machines using other kinds of CISC and RISC processors, and no one believes for a second that any CISC or RISC architecture except the ARM chip has any chance of denting Intel's dominant in the long term. And ARM is a bit iffy at that, no matter how much we might be spoiling for a fight.

Sales of non-X86 machines were off 28.7 percent, to $841.9 million. RISC server sales (Sparc and Power mostly) fell 16.8 percent to $451.8 million and CISC machines (mostly IBM, Unisys, and Fujitsu mainframes) fell 34.3 percent and Itanium-based server revenues plummeted 46.5 percent. IDC did not give a figure for CISC and Itanium machines individually, but together these types of machines only accounted for $390.1 million, and of this, mainframes accounted for $263.1 million of that. IBM's z/OS-based machines drove $201.9 million in revenues, or the bulk of the mainframe sales but down a jaw-dropping 39.3 percent; Fujitsu got the remaining $61.2 million in sales for mainframes in EMEA in Q1.

Windows-based server sales held up relatively well in EMEA, only off six-tenths of a point to $1.6 billion, and accounted for 52 percent of all server revenues in the quarter. Linux server sales exploded on a global basis as companies try to cut costs by moving off Unix systems, and in Europe, while the growth was more muted, it was still growth nonetheless, with Linux-based system sales up 6.5 percent to $750 million as best as IDC can figure. Unix systems declined by 27.6 percent to $542.4 million.

Despite a 19.1 percent drop in revenues in Q1, Hewlett-Packard, which is the dominant Itanium seller in the world as well as the dominant X86 seller, was able to hold onto the top revenue slot in EMEA, with $1.19 billion in revenues.

IBM's 17.8 percent revenue chop in Q1 was almost as bad, and it only brought in $819.5 million in sales this time around. System x machines brought in $251.4 million, Power Systems/AIX machines did $248.5 million, newer System z machines did $143 million and older zSeries mainframes did $58.8 million. It's not clear what the remaining $117.8 million was for--PureSystems were not selling yet--but a good chunk of that had better be Power Systems running IBM i. Some of it was probably Power Systems running Linux.

Dell actually grew 6.4 percent, to $436.6 million, and Oracle shrank by 6.2 percent to $226.2 million. Fujitsu rounded out the top five, with $182.4 million in revenues, down 7.4 percent, and other vendors, buoyed considerably by server upstart Cisco Systems had $263.2 million in revenues, up 19.2 percent.

For mainframe and Itanium machines, the Great Recession is still happening, the former because of the Oracle-HP lawsuit and the latter because a System z mainframe upgrade cycle is not going to start until the end of this year. The question is whether the key European countries will be dragged down into recession--the United Kingdom is technically in recession--and take the United States with them this time.

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