Server sales on rise in Q1

First quarter of 2010 sees x86 server sales in UK distribution benefit from fresh business demand and technologies

Sales of x86 servers through UK distribution recovered strongly during the first quarter of 2010, with unit sales up 13 per cent in Q110 compared to Q109. Strong growth was boosted partly by a weak comparison period one year ago, when sales of x86 servers had been drastically affected by the effects of the economic recession and the ensuing near halt in corporate IT spending.

However, the healthy growth during the first quarter of 2010 was also the result of a gradual pick-up in business demand. As an increasing number of small, medium-sized and corporate customers began to release the IT budgets frozen during 2009, server sales benefited during Q1, and monthly growth rates within the quarter peaked at 49 per cent year on year in February.

And there is more good news to come. While rising unit sales of servers would probably have been enough to create a feeling of relief among major server vendors, sales in revenue terms also increased. In Q1, the 13 per cent year-on-year x86 server unit growth in UK distribution represented a 29 per cent leap in revenue terms.

There was also another factor that contributed to soaring revenues in distribution this quarter - the development of average selling prices (ASPs) for x86 servers. Between Q1 of 2009 and Q1 of this year, x86 server ASPs in UK distribution went up by as much as 13 per cent to £1,396. This evolution strongly and favourably influenced revenue generation.

The reasons for rising ASPs in the x86 server segment in this quarter were two-fold. First, the second half of 2009 and Q1 this year were characterised by considerable component shortages, resulting in component price increases that then translated into a rise in x86 system ASPs.

But there was also a second, and healthier, reason for the rise in ASPs. Last year saw a number of new technologies, especially processor technologies such as Intel’s Xeon 5500, that boosted ASPs. The announcement of these technologies and their consistent addition to vendor product portfolios in the course of 2009 also helped the x86 server unit mix shift towards higher price bands.

Consequently, the ≥£1,100 price band made up 56 per cent of x86 servers sold through UK distribution in Q1 of 2010, compared with only 43 per cent a year ago.

The end of Q1 saw further processor technologies launched, including the Intel Xeon 5600 and 5700, and AMD Opteron 6100 series announcements. These announcements are likely to further push sales upwards in coming quarters – with a continuous positive effect on revenue generation.

With economic pressures easing, SMB and corporate markets can both also be expected to release increasing parts of their IT budgets as 2010 progresses, be it to optimise their IT infrastructures, or to actually replace existing x86 servers hardware.

Marie-Christine Pygott is a senior research analyst at Context