European revenue sales of enterprise networking equipment are on an upward trend in the last 4 weeks after a lower than expected Q3 performance, while Enterprise storage revenues are on par with last year’s results but the server market has continued to slump, according to CONTEXT, the IT market intelligence company.
The latest data on sales through European distribution show something of a turnaround for parts of the infrastructure market over the past four weeks. A month ago, networking sales were slowing after an impressive run starting at the beginning of 2021 and storage and server performance was lower than 2020 levels. However, since then, networking sales have matched 2019 levels despite the chip supply issues which have severely impacted this category. These are forecast to last another year, raising prices and, in turn, positively impacting channel revenues.
Storage and servers lag behind
Impressive performance in the backup and flash array segments enabled the storage sector to end Q3 positively. However, HCI sales continue to slow, despite a small positive year-on-year growth in Q3 21. Q4 has started soft and this could be the story of the quarter for storage, but as supply problems dissipate in Q1 2022 we could see some improvements.
“Unfortunately, the server market is not showing many signs of improvement”, said Gurvan Meyer, Business Analyst at CONTEXT. “We were expecting a small bounce in the final two quarters of 2021, but recent discussions with CONTEXT partners and clients have not provided cause for optimism. Underlying trends affecting the sector—including the move from on-premise to cloud solutions and the increasingly software-centric nature of the datacentre—are negatively impacting sales, and this won’t improve much in coming quarters.”
CONTEXT also observed a decline in units sold, with Q3 2021 being the lowest volume in four years, at 91,021 units. Both rack and tower form factors have been impacted, although the former increased slightly year-on-year in the last quarter. Shortages of components aren’t helping either and have had an impact on sales configurations: “stock and sell” products are the main revenue driver for the market now rather than build-to-order systems.
Germany and the UK are the main factors of soft demand in the server market. This could be explained in part by uncertainty created by the recent German elections, and the UK’s HGV driver shortages and Brexit-related port congestion. The latter continue to exaggerate global supply problems and increase backlogs.
More positively, total server RAM capacity consumption continues to increase with 11.1% growth in Q3 versus a year ago. This is confirmed by market share gains for both 64GB and 128GB capacity units, especially in Q3 2021, where the latter increased its market share to 5.4%, from just 1.8% the previous quarter.