Squeaky bum time for server makers: Dollar dashes buyers' budgets

Can't justify price hikes with better functionality? Oh dear

A currency noose hanging around the neck of customers’ budgets in Europe looks set to throttle server spending, according to IDC.

Appreciation of the US dollar has forced American tech makers to increase their prices this year on several occasions, and this disrupting impact is tipped to worsen as the unsettled economic and political situation in Europe continues.

IDC warned: “The ASP (average sales price) increases could soon start to affect value propositions and demand toward the end of 2015 if vendors can’t justify the increased prices with additional functionality and performance.”

This forex impact was already evident in Q2, as market revenues would have grown 21 per cent in constant Euro currency but actually went backwards when the dollar conversion was factored in.

Shipments and the value of those boxes shrank 2.5 and 4.5 per cent respectively in calendar Q2 to $3.1bn and a little over 525k units, ending four quarters of upward swings.

For the first half of the year, factory revenues grew 2.3 per cent to $6.2bn and unit sales edged up 0.7 per cent to one million servers.

The numbers were generated in the “face of a challenging economic situation”, the abacus stroker claimed.

“This stability has been a balancing act, with price inelasticity toward richer server configuration and increased average selling prices implemented by large x86 server vendors in local currency as a means of maintaining dollar profitability,” IDC said.

A cyclical mainframe refresh, in part spurred by IBM’s latest System z upgrade and consolidation or Big Data projects, helped to offset some of the badness in Q2.

As a result, non-x86 spending dipped 8.4 per cent to $569.4m which was a slower descent than in prior quarters. CISC mainframe was up 9.2 per cent but was countered by double digit crashes in RISC and EPIC (down 20.1 and 28 per cent respectively).

On the x86 side, hefty HPC projects in universities and meteorology institutes helped server makers swerve a greater overall shipment drop in the quarter. And ODMs continued to mop up business with large service providers.

Western Europe was down 0.3 per cent in spending, and central and eastern Europe and Africa declined 10.1 per cent.

HP declined 3.4 per cent but accounted for more than $1 in every $3 spent, Dell grew 4.5 per cent, and IBM was down 37.4 per cent after selling System x to Lenovo. ®

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