Server market recovery will be slow, says analyst

Analyst firm IDC has today continued to forecast a gloomy outlook for the Europe, Middle East and Africa (EMEA) server market.

But it also said declines in growth were bottoming out during the second quarter of 2009 (Q209), marking the beginning of a slow path to recovery into the rest of the year.

The analyst's EMEA Quarterly Server Forecast said Q209 server revenue would decline 39.3 per cent compared to the same period last year, to $ 2.9 billion (1.8 billion).

This will also mark the fourth consecutive quarter of year-on-year spending decline, and a further regional deterioration of server sales, which have already recorded a 34.3 per cent revenue decline in 1Q09.

But IDC forecast that Q209 would represent the peak of annual server declines in both revenue and units, with the number of boxes shipped standing at less than half a million - a decline of nearly 30 per cent.

"The server market slowdown is taking different shapes and timeframes depending on the country, with the UK already severely hit, and continental countries following on that path," said Beatriz Valle, IDC European Server research analyst.

The forecast went further, predicting revenue declines would gradually soften during the next four quarters, as buyer interest likely resumes this autumn and that, albeit modest, green shoots would become evident from the second half of 2009.

But it added that positive revenue growth would not likely return to the EMEA server market until the third quarter of 2010, with revenue bottoming out in the first quarter of 2010 at $2.6 billion (1.6 billion).

Split out by segment, IDC said x86 revenue was anticipated to fare slightly better than the rest of the market, with revenue declines back to single digits by Q110, largely due to demand for blade servers and consolidated infrastructures.

It also predicted that non-x86 revenue, whose decline will remain in the double digits in Q110, would make a decisive comeback in the second half of 2010 due to pent-up demand for specific scale-up refreshment projects in the corporate space.

In absolute revenue terms, IDC added that true recovery belonged in the volume and midrange segments, as x86 technologies continue to cannibalise other server areas, pushing up demand for lower-priced boxes.