External Disk Systems Grew 7% Y/Y in Western Europe for IDC

IDC reported that external disk storage systems (EDSS) factory revenues in Western Europe grew 7% over last year to $1.23 billion in the third quarter, according to EMEA Quarterly Disk Storage Systems Tracker.

Despite a further slowdown in growth, year over year comparisons were helped by the appreciation of European currencies against the greenback, but constant currency calculations reveal a more mixed picture and an overall decline of 2% over the same period last year.

In line with average seasonal trends, the market declined 3% over the second quarter. Beneath the bonnet, spending on high-end storage systems weakened sequentially as a strong wave of mission critical refreshes passed. With this quarterly drop, regional spending on high-end was virtually flat over last year, taking currency impact into account.

The Western European external disk storage systems market entered technical recession as this is the second yearly decline of quarterly activity in the market in a row. But 2010 is a tough comparison as substantial pent-up demand from 2009 was satisfied, especially in Germany. However, contraction was mild overall.

Moreover, while the eurozone crisis puts the market under stress, the disk storage systems market once again demonstrated its overall resiliency against economic turmoil, producing growth in segments and markets that are otherwise heavily challenged.

High-End Cycle Cools, Uptake in Midrange
"Over the last four quarters, high-end disk storage systems experienced a strong deployment cycle in which Western European enterprises spent $1.5 billion, not including additional software and professional services content. Last quarter we passed the high point of this cycle. Enterprises continued to spend on mission-critical system refreshes, storage consolidation projects, and cloud-enablement deployments, albeit more moderately," said Donna Taylor, research director for IDC’s European Storage Group. IDC defines high-end as a selling price of $250,000 or more.

Demand for overall midrange configurations (priced between $25K and $250K) improved sequentially by 4%, beating historical seasonal trends, and by 2% year over year. IDC’s data show that market activity in the Western European midrange external disk storage systems space was at pre-crisis level during the third quarter. Once again, sub-$100K midrange systems outperformed the market, hitting a sweet spot with Western European customers.

Entry-level disk storage systems (selling for less than $25K) performed well, with a 10% increase in dollar value over last year. Small business and branch office deployments drove sales of very cost-efficient external storage systems priced between $10K and $15K, which is highlighted by a year-over-year growth rate of 17% in that price band.

Top Vendor Highlights
EMC continued to dominate the Western European market for external disk storage systems, with overall turnover unmatched by any competitors. However, the Symmetrix business is increasingly challenged by HDS and HP, while the midrange space is highly competitive in all price bands due to the continuous upgrades from rivals. Despite this strong headwind, EMC managed to outperform the overall market by a comfortable margin, adding 13% more dollar revenue compared to last quarter, as VNXe, Isilon, and Data Domain added incremental revenues to the top line.

HP pulled off a strong quarterly performance and grew its market share over the second quarter, a feat only a few were able to mimic. This enabled HP to recapture the second spot. HP’s 3Par systems made further inroads into Western European enterprises and service providers, while the resurgent VTL business registered record revenues. Meanwhile, legacy business sales, including EVA, MSA, and P9000/XP, held up healthily.

NetApp outperformed the market with 18% year-over-year growth. However, NetApp’s revenues dropped 11% sequentially, allowing HP to retake the second position from NetApp. The steep quarterly drop is a result of major customer wins in the previous two quarters that propelled the company to record heights.

IBM struggled in fourth place, as its revenues remained flat despite a weakening dollar against the European currencies. While DS8000 sales were stable and still accounted for the single biggest source of revenue for the company, XIV failed to drive further growth this quarter. Storwize V700 added over $20 million to IBM’s top line in Western Europe compared to last year. However, that was offset by declining DS5000 sales for the quarter.

Dell successfully launched large scale Compellent sales across the region, landing major deals in several markets, regaining the fifth spot. That helped the company to achieve 10% sequential growth in a seasonally weaker market and produce some dollar growth on a yearly basis, despite a big drop from the end to the company’s EMC OEM partnership.

Hitachi Data System showed the largest year over year gain, at 23%. However, it lost its fifth place to Dell. The effect of the VSP launch moderated after a stellar start in the fourth quarter last year, resulting in a softening quarterly revenue stream.

Factory revenue from EDSS sales, 3Q11, Western Europe

                   
  (Source: IDC EMEA Quarterly Disk Storage Systems Tracker)

Country Highlights
High-end deployments drove the United Kingdom to strong yearly growth. Germany experienced a year over year decline of 4%, but that is a tough comparison against a record third quarter last year. The German market was still very healthy, with demand at pre-crisis levels. France was elevated primarily by the currency impact, with high-end systems generating some organic growth. Activity in the high-end segment dropped off heavily in Italy during the third quarter due to budget freezes in the government and financial sectors, which was offset by growth in the midrange and entry-level price segments.

High enterprise storage activity in Sweden helped the Nordics to organic growth, while currency rates pushed all countries up in dollar terms. Iberia was also fueled by high-end storage deals despite the dire situation of the overall economy and public debt burden.

Factory revenue from EDSS sales, 3Q11, Western Europe

  
   (Source: IDC EMEA Quarterly Disk Storage Systems Tracker)
  
*constant currency calculation