Server revenue to fall by 5% in APAC region: IDC

BANGALORE: The Q2 2002 results on the server market are not very far from expected and IDC is still expecting a better second half of 2002 provided the US economy stays on the course of economic recovery. The recent corporate debacles have had an impact on the equity markets and corporate investments, but IDC's forecast assumes the situation will not aggravate further.

However, based on first half results, IDC believes that server revenue for 2002 may fall short of the IDC forecast by 5 percent due to the price pressures and slower than anticipated rebound.

According to preliminary results released by IDC, the Asia/Pacific (excluding Japan) server market declined in Q2 2002 by 9 percent in revenue and 3 percent in unit shipment terms over Q2 2001. The overall server market stood at $1.35 billion and 133,577 units in Q2 2002, compared to $1.49 billion and 137,101 units in Q2 2001, respectively.

The year-on-year growth was similar to the previous quarter, although the market was up 5 percent by revenue and 6 percent by units over Q1 2002. The growth was driven by strong demand in Australia, Korea, Malaysia, Thailand, Indonesia and New Zealand, all of which grew faster than industry average in revenue terms.

Australia was by far the leader with 39 percent sequential and 25 percent annual revenue growth in Q2 2002, driven largely by investments from the government and finance segments. The continuing slowdown in China's server growth impacted the region to a large extent.

The slowdown in the PRC stemmed from a slackening in telecom and government investments, and the growing price pressure in the market due to the increasing presence of local players. This slowdown was also evident from the difference in China's unit (4 percent) versus revenue (-22 percent) growth over Q2 2001.

"The markets continue to be in a cautious mode, with most organizations ensuring that the global economy is on its way to recovery before they launch any major investments," said Avneesh Saxena, Director, Computing Systems, IDC Asia/Pacific. "Amidst this challenging environment, server vendors can continue to expect increasing pressure on server prices and demand for higher value in terms of additional services."

Singapore’s server market remained soft in Q2 2002 due to the ongoing consolidation in the banking segment, apart from the sluggish demand in the manufacturing segment, which remained stymied by the slump in the global demand for electronics and semiconductor products.

Life sciences, education, and government segments were some of the bright spots in the local server market, while messaging, wireless and mobile eCommerce applications helped to fuel some of the server spending in the telecom segment.

• The SIAS market declined the least at 2 percent by units and 6 percent by revenue year-over-year in Q2 2002. Value was lagging in most countries due to the increasing share of local players, the shift towards lower-end servers, and price aggressiveness.



• Non-SIAS Unix server revenue declined 8 percent by revenue and 6 percent by units year-on-year in Q2 2002. Finance, telecom, government, education and manufacturing were the key segments for these servers in Q2 2002.



• Non-SIAS non-Unix servers declined the most at 19 percent by revenue and 44 percent by units year-on-year in Q2 2002. Much of the core investments made by banks in Korea and China in Q2 last year were missing this quarter, which impacted the growth of this segment.