Australian server market goes kaput

Revenues decline 38.8 per cent, taking the market back to 2004 levels

The Australian server market has gone to “hell in a hand basket” in the first quarter of the year, according to IDC.

In the overall server market units shipped declined 38.9 per cent, while revenue declined 38.8 per cent year-on-year.

The x86 server market has shrunk to its smallest recorded figure since the first quarter in 2004. Units shipped dropped 38 per cent and revenue contracted a whopping 46.4 per cent. In the non-x86 market, revenues declined 26.6 per cent to outperform the x86 market.

“The significance of this is it actually goes beyond IT in a lot of ways,” IDC enterprise server and workstations analyst, Matt Oostveen, said. “If you think about the ramifications of a very mature market place like the server business contracting by so much it shows that firstly, business confidence is very low and no one is spending their money.

“It shows that even a mature market place with a large install base, it’s not like it is a new technology, can suffer an extremely large decline and it shows that in an SMB-centric market place like Australia small businesses are very concerned about keeping their own head above water and they want to keep their staff as well. When they are given a choice between keeping staff and keeping themselves buoyant versus splashing out on a new x86 server it is obvious which one is going to win out.”

The dramatic drop is in stark contrast to news the nation avoided a technical recession with GDP growth of 0.4 per cent last quarter but could also be an indication the economy has hit bottom and may rebound slightly in the next quarter, Oostveen said.

“I think it will be business as usual, and that business is terrible. In 2009 we are going to see a big rewind from 2008,” he said.

The IDC results showed the top three server vendors remained the same with HP leading Dell and IBM.

“There is a standout performer, and that is Acer, who more than doubled its market share by unit shipments,” Oostveen, said. “They went from 2.8 per cent to 6.7 per cent market share. That can be explained to its close ties to the education market.” Last week, the analyst firm said a precipitous fall in worldwide server shipments triggered a sharp decline in revenue for server makers during the first quarter of 2009, IDC said in a survey.

Worldwide server unit shipments declined 26.5 per cent year-over-year in the first quarter to around 1.49 million units, the largest unit shipment decline in five years. Worldwide factory server revenue was down 24.5 per cent to $US9.9 billion in the first quarter.

The recent results contrast sharply with reports last year that the amount spent on servers in Australia during 2007 broke through the $US1 billion dollar mark to $US1.001 billion. The 17 per cent increase in Australia's server spending was the strongest annual growth since 1996.

The news follows on from Dell posting a 63 per cent fall in net income during the first quarter of 2010, including steep falls in server and desktop PC sales

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