Server Shipments Decline in 1Q06 in EMEA, Says IDC

Sales of servers in EMEA totaled $3.8 billion in 1Q06, down from $4.9 billion in 1Q05. Shipments declined by 8.8% year on year, reaching 567,660 units compared to the record 676,849 units experienced in the same quarter a year ago. "The data confirms that there is a trend towards the commoditization of the server market, with lower prices resulting in smaller profit margins," said Beatriz Valle, research analyst, IDC European Enterprise Server Solutions. "Volume systems are offering improvements in performance and scalability, becoming a viable option for a wider range of vertical markets. Companies are modifying their IT spending patterns, as technological improvements make it possible to strategically plan server purchases to address specific business needs, and to enhance existing hardware rather than buying new systems." The Central and Eastern Europe server market recorded the strongest growth in the region for the fourth consecutive quarter, displaying annual growth rates of 13.9% and 28.1% in factory revenue and shipments respectively. "These strong results reflect an increase in server demand from vertical markets such as finance, while private and public investments in this geopolitical area continue to fuel growth," said Stefania Lorenz, program manager, Hardware and Systems group, IDC. The Middle East and Africa benefited in 1Q06 from channel and vendor backlogs that had contributed to worse-than-expected results during the previous quarter. Factory revenue grew at an annual rate of 12%, and shipments grew 9% year over year. Following the same pattern seen throughout 2005, annual growth in the Western European region was the slowest, with a decline of 7.1% in factory revenue and a growth rate of 6.4% in shipments. Despite an increase in server shipments, the drop in factory revenue indicates that volume servers, which are largely benefiting from replacement cycles, are failing to alleviate the slowdown currently suffered by midrange and high-end segments. HP gained the leadership position in the EMEA server market from IBM in 1Q06; HP's revenue totaled $1,276 million, and IBM's $1,179 million. Sun Microsystems was third in revenue terms with $406 million, recording a decline of 1.5% from a year ago, followed by Fujitsu Siemens. Dell also generated revenue growth, narrowing the gap with Fujitsu Siemens this quarter.