Server Market Undergoes Precipitous Drop

March 31, 2009: According to a new report from IDC, the enterprise server market in Asia Pacific has declined for the first time since the 2001 dot.com meltdown, with shipments retracting 4.6 percent year-on-year.

IDC's Asia/Pacific Quarterly Enterprise Server Tracker results for Q4 2008 show that server shipments in Asia/Pacific (excluding Japan) have plummeted after 25 consecutive quarters of strong growth. The decline in server spending in Q4 2008 was even more dramatic, contracting by double digits for the second consecutive quarter and dragging total spending for the full year 2008 down by 4.9 percent.

IDC says that the malaise of the economic and financial crisis in the US and Europe quickly has spread to Asia/Pacific \causing a debilitating slowdown in server spending, with every country witnessing steep double digit declines - with the exception of the PRC, Thailand and Vietnam that registered modest single digit declines on an annual basis.

“It was an absolutely nerve wrecking quarter when six of the top seven markets witnessed almost a third of server spending plunge on a year-on-year basis,” said Rajnish Arora, Director of Asia/Pacific Enterprise Servers & Workstations Research at IDC. “The modest, single-digit decline in server spending in 2H 2008 in the PRC was expected after an astounding 30 percent surge in 2H 2007 underpinned by massive infrastructure buildout in the run up to the Olympics.”

“The resiliency of the Singapore server market seemed like a mirage in Q4 2008 with shipments plunging 19.6 percent year-on-year after two consecutive quarters of healthy double-digit increases since Q2 2008,” said Rajnish. “Spending on non-x86 servers, which are typically used for running mission critical core-business applications, sharply decelerated to 34 percent decline in Q4 2008 compared with 23.1 percent drop in Q3 2008."

“Hong Kong which has a very large concentration of global and regional financial services companies, took the brunt of the financial services sector meltdown with server spending contracting an eye-popping 52 percent in Q4 2008,” added Rajnish. “Server spending in Hong Kong declined the most among the 14 markets in Q4 2008 year-on-year. This resulted in Hong Kong becoming the 7th largest server market in the region in Q4 2008 versus the 5th position it held in Q4 2007.”

The analyst firm says that IBM remained well perched on the top branches with a 37 percent revenue share of the Asia/Pacific server market in 2008, while HP remained the dominant vendor in unit shipment terms with 30.7 percent of the market.

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