Infrastructure boom swells server sales

Despite predictions that IT spend in the Middle East should swing increasingly towards the direction of software and services, the ever-resilient hardware segment refuses to implode...as those in the server channel will testify.

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By  Andrew Seymour Published  October 12, 2008

Despite predictions that IT spend in the Middle East should swing increasingly towards the direction of software and services, the ever-resilient hardware segment refuses to implode...as those in the server channel will testify.

Resellers in the business of providing infrastructure solutions would be foolish not to make the most of buoyant server demand after shipments in the Middle East and Africa spiked 16% year-on-year in revenue during the second quarter.

While the expansion leaves the Middle East trailing Central and Eastern Europe in terms of growth, it is considerably stronger than the EMEA average.

Research house IDC declines to break out volumes geographically, but says overall EMEA shipments rose to nearly 700,000 units in Q2, creating a market worth more than US$4.4 billion - around 9% more than the previous year.

To put it into further context, the performance of the server market during the second quarter represents the highest revenue ascent for 18 months and the strongest in terms of shipments for almost three years.

However, the discrepancy between unit and revenue growth indicates the x86 segment is showing the strain of commoditisation and downward pricing pressure. 95% of the server market is comprised of industry-standard servers.

That said, the Middle East and Africa doesn't appear to have fared too badly.

"Demand for high-end servers was again particularly strong, reporting the highest percentage growth thanks to the larger sectors such as banking, telco and processor manufacturing across the regions," explained Stefania Lorenz, research director for the CEMA region at IDC. "Overall, sales of bladed servers grew by 38% annually in the regions combined," she added.

Revenues of volume servers in EMEA remained flat at US$2.2 billion during the second quarter as the bulk of server growth went to high-end and midrange boxes.

Entry-level promotions aimed at the SMB sector inspired strong pedestal sales, but there was only one overall winner. "Blades continued to far outstrip the overall market, with revenue up 42% annually to over US$400m," said IDC research analyst Giorgio Nebuloni.

Windows, meanwhile, led the operating system results as annual growth of 10% kept it three percentage points ahead of Unix, which saw sales rise 8% in dollar value. The big loser was Linux, which suffered a 2% year-on-year decline, its first drop for more than six years.

In vendor terms, HP and IBM remain neck and neck at the top of the table after Big Blue posted an 18% rise in shipments to draw level with its fiercest rival. Its System Z mainframes excelled in particular, while the recently-created Power systems family contributed sales of US$180m.

Third-placed Sun Microsystems held firm following a fairly unspectacular 2% increase in shipments, although its SPARC Enterprise line did enjoy triple-digit growth. However, Sun will be concerned that it let Dell close the gap to just three percentage points during the second quarter. Sales of its Primergy hardware helped the company achieve a 17% jump in revenues to US$425m.

Fujitsu Siemens made little progress, however, after growing sales just 3% to US$279m.

In similar vein to its desktop contemporary, the EMEA server market is now largely dominated by just five brands. The rest of the market accounts for a mere 7% of revenues and collectively saw sales drop 1% in the quarter.

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