Gartner Says EMEA Server Revenue Grew Despite Shipments Falling 4 Percent in the Third Quarter of 2014

In Europe, the Middle East and Africa (EMEA), server shipments in the third quarter of 2014 declined 4 percent, according to Gartner, Inc. Server revenue reached $2.9 billion, a 1.2 percent year-over-year increase.

“The server shipment growth seen in the second quarter proved to be a short-lived phenomenon, and marginal revenue growth of 1.2 percent in the third quarter of 2014 highlights the fragility of demand,” said Errol Rasit, research director at Gartner. Server revenue grew for the third consecutive quarter after 10 consecutive quarters of revenue declines.

“Despite many positive growth expectations for the EMEA server market – such as an accelerated installed base refresh, cloud computing and digital business – many of these projects will bear fruit over many years, rather than providing a short-term uptick in demand. Today, these effects are not positive enough to radically outpace budgetary caution and server consolidation.”

In the third quarter of 2014, HP extended its revenue share lead in EMEA with 6.4 percent growth (see Table 1). The vendor posted a strong result despite a shipment decline of 8.2 percent (see Table 2). HP’s growth in the third quarter was fueled by demand for blade and rack-optimized systems, the result of a fairly traditional demand profile throughout the quarter.

Dell moved to become the second-ranked vendor in terms of revenue and shipments, replacing IBM. Dell exhibited strong growth of 9 percent in revenue and 3.4 percent in shipments. This compares to double-digit declines for IBM’s revenue and shipments. Dell exhibited a consistent improvement in sales as it improved channel coverage, product breadth and solution offerings. IBM is experiencing a period of major transition as it completes the divestment of its x86 business, its RISC business undergoes renovation in the face of declining UNIX demand, and its mainframe business hits a cyclical low point in anticipation of new product releases.

Table 1                                                                                                                                                      

EMEA: Server Vendor Revenue Estimates, 3Q14 (U.S. Dollars)                                                                                                                                           

Company	3Q14 Revenue	3Q14 Market Share (%)	3Q13 Revenue	3Q13 Market Share (%)	3Q14-3Q13 Growth (%)
HP	1,165,314,324	40.63	1,095,435,019	38.6	6.38
Dell	453,965,225	15.83	416,240,750	14.7	9.06
IBM	440,807,656	15.37	563,758,746	19.9	-21.81
Fujitsu	201,063,167	7.01	195,725,072	6.9	2.73
Cisco	161,460,000	5.63	121,940,000	4.3	32.41
Others	445,650,206	15.54	442,335,243	15.6	0.75
Total	2,868,260,577	100	2,835,434,829	100	1.16

Source: Gartner (December 2014)

Table 2                                                                                                                                                      

EMEA: Server Shipment Estimates, 3Q14 (Units)                                                                                                                                                

Company	3Q14 Shipments	3Q14 Market Share (%)	3Q13 Shipments	3Q13 Market Share (%)	3Q14-3Q13 Growth (%)
HP	203,294	38.66	221,427	40.43	-8.19
Dell	107,965	20.53	104,433	19.07	3.38
IBM	37,979	7.22	44,673	8.16	-14.98
Fujitsu	29,941	5.69	29,900	5.46	0.14
Cisco	16,705	3.18	15,259	2.79	9.48
Others	129,907	24.71	131,935	24.09	-1.54
Total	525,791	100	547,627	100	-3.99

Source: Gartner (December 2014)

“Many IT organizations are struggling to prioritize server projects in the context of broader data center modernization initiatives, such as networking and storage optimization,” said Mr. Rasit. “The challenge for the server providers will be to help organizations make the right spending decisions to support IT project success during 2015. This may limit server spending in the short term, but will pay off in the long term as server projects rise in importance once again.”

From a regional perspective, only Western Europe recorded revenue growth (4 per cent) compared to revenue declines of 6 and 7 percent in Eastern Europe and the Middle East and Africa, respectively. During the third quarter of 2014, x86 server revenue increased 6 percent in EMEA. RISC/Itanium Unix revenue declined 13.2 percent and the “Other CPU” segment’s revenue decreased by 39 percent.

“Eastern Europe and the Middle East and Africa continued to exhibit weakness in demand. These regions still contain the promise of long term growth, but macro-economic and geopolitical challenges in key markets have muted short-term server investment,” said Mr. Rasit.

Additional information is available to subscribers of Gartner’s program of quarterly statistics for servers, worldwide. This program provides worldwide market size and share data by vendor revenue and unit shipments. Segments include: region, vendor, brand, sub brand, CPU type, CPU family, Max sockets, platform, price band, operating systems and distribution channels.