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Revenue grows in Western Europe Server Computing

Mathias Knoefel, Senior Enterprise Analyst at CONTEXT

Combined revenues from server computing products sold to enterprise customers through the distribution channel in Western Europe (WE) increased by +10.4% year-on-year in 2018, according to the latest distribution data published by CONTEXT, the IT market intelligence company.

The product segments grouped in this meta-category are preconfigured server systems, random access memory (RAM), processors, hard-disk drives (HDDs) and solid-state disks (SSDs). The growth was driven by a number of trends, among them the ongoing adoption of SSD upgrades and an increase in sales of RAM upgrades

The combined server computing categories saw year-on-year revenue growth in every month of 2018 except December, which was a short month due to the Christmas holidays. The drivers of this growth, however, changed throughout the year.

What was surprising was the resurgence of preconfigured server systems, from which revenues were up by +10.7% in 2018”, said Mathias Knoefel, Senior Enterprise Analyst at CONTEXT. “While this was not consistent over the year, there was strong growth in several months including a year-on-year increase of +47.3% in September. Although the increased revenues were largely the result of server refreshes, there was no corresponding growth in unit sales and these declined steadily even as the value of server configurations increased due to the use of higher-value SSD and RAM components.

Year-on-year revenue growth from RAM upgrades declined as the year went on, but only became negative in December resulting in an increase of +14.3% for 2018 as a whole. Supply constraints throughout the year meant that average selling prices (ASPs) remained high.

Revenues from HDD upgrades were down by -6.4% year-on-year. The ongoing decline was expected – and is set to continue – as SSD upgrades are chosen over HDDs. This switch drove revenues for SSD upgrades up by +22.0% in 2018.

The server refresh mentioned above also helped drive revenues from server processor upgrades, as did the transition to Intel Xeon scalable processors. An additional factor, especially important from September 2018 onwards, was Intel’s warning of upcoming shortages, which encouraged customers to take precautions. “When looking at the revenue share over time, it becomes clear that over the past two years, RAM has played a more important role within server computing”, added Knoefel. This was helped along with the increase of average ASPs due to supply constraints. Similarly, CONTEXT notes that the revenue share of SSDs have certainly increased compared to the slow but steady decline of HDD revenues. “One thing that looks almost consistent, though, is the revenue share by preconfigured server systems. As we have seen a continuous decline in units, it confirms the increase of achieved ASPs we have been seeing throughout this time”, he added.

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