Server Makers Have $5.3 Billion Bumper Crop in Q4 in Europe

Published: March 15, 2007

by Timothy Prickett Morgan

Server makers, resellers, and distributors in EMEA had a pretty good end to 2006, according to statistics compiled by market researcher IDC. By its reckoning, the server market grew by 7 percent in the fourth quarter of 2006, hitting $5.3 billion in sales across all vendors and breaking through the $5 billion mark for the first time in the history of the server business. Sales growth in Europe, in fact, helped push up the worldwide market in the final quarter of last year.

Global server revenues only grew by 5.2 percent to hit $15.2 billion in the quarter, in fact, and if you do the math, that means that sales outside of Europe only grew by a little more than 4 percent, to just under $10 billion. Europe has been a laggard in the server racket for so many years in the past two decades that it is surprising to see it as a geographical area of strength. But, given that server virtualization and consolidation efforts are the primary drivers of this server build out, it is hard to say how long the good times will last.

"Server virtualization and consolidation projects are driving most of the growth on the server market as evidenced by an increase in average selling value on the market and activity slowdown for entry-level servers," said Nathaniel Martinez, IDC's European enterprise servers program manager, in a statement accompanying the market share figures. "Whereas server virtualization is mainly used as a platform for consolidation in large accounts, small and medium organizations are starting to consider it in order to gain access to technology they could not afford in the past, such as high availability, redundancy systems, and backup and recovery tools."

Another analyst at IDC's European operations offered this assessment: "The downward pressure seen on prices during the first quarters of 2006 is now reversing," said Beatriz Valle, who is IDC's European enterprise server solutions analyst. "Organizations across EMEA are increasingly looking at shifting their IT infrastructure toward a shared compute resource, which in turn drives demand for additional scalability, memory attachment, and I/O. In addition, in some regions, replacement activity for high-end RISC and mainframe systems has also acted as a market driver."

Western Europe continues to be the bedrock of the server market in this area, with sales rising 7 percent to $4 billion. The server market in Germany grew by 20 percent in the quarter, and Sweden grew by even more. Eastern and Central European countries as well as those in the Middle East had double-digit revenue growth in the quarter, according to IDC, and high-end RISC and mainframe sales were up 17 percent. Telecommunications companies, banks, healthcare firms, and governments were the big buyers of big iron, and a lot of the revenue went into the cash registers of Hewlett-Packard, Sun Microsystems, and Fujitsu-Siemens. The Czech Republic, Croatia, Egypt, and the United Arab Emirates were singled out for particularly high growth at the high end of the server space.

IBM, of course, had the dominate share of server revenues in Europe, the Middle East, and Africa, with $1.98 billion in sales, up 4 percent. HP came in second during the final quarter of 2006, with sales up 10 percent to $1.63 billion. IBM lost one point of market share in EMEA and HP gained one point compared to Q4 2005.

Sun never lost the number three position in EMEA like it did in the United States and in the rest of the world to Dell, and with 21 percent revenue growth in the quarter and sales of $549 million, it opened up a whole lot of water between itself and Dell, which is struggling on a number of fronts right now. Dell's server sales in EMEA were up a meager 4 percent to $377 million. Fujitsu-Siemens rounded out the top five with $357 million, up 10 percent. And if Dell is not careful--and if Fujitsu-Siemens gets traction with its impending "Jupiter" Sparc64-VI systems, Dell could be knocked to the number five position.

All the other server makers in EMEA accounted for $361 million in sales, down 5 percent.

For the full year, IDC says that IBM had $5.69 billion in server sales, up 3 percent, followed by HP, with $5.41 billion in sales, up 3 percent. HP is obviously catching IBM, and if IBM can't pull off good mainframe numbers in 2007 and get its Power6-based Unix servers out the door on time, HP has a shot at passing Big Blue. Sun grew its sales in EMEA by 13 percent for the full 2006 year, hitting $1.94 billion, with Dell up 5 percent to $1.31 billion and Fujitsu-Siemens off 7 percent to $1.26 billion.

The whole EMEA server market accounted for $16.9 billion in sales in all of 2006, up 2 percent. This growth in revenues was exactly the same as that exhibited by the global market in 2006, which rose by 2 percent to $52.3 billion.

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