1Q12 UPS service revenues down 1% year-over-year

Revenues from the sale of UPS services in the first quarter of 2012 are roughly 1% less than in the same period last year.
By Source: IMS Research (IHS Inc.) June 21, 2012

Revenues from the sale of uninterruptible power supply (UPS) services in the first quarter of 2012 are roughly one percent less than in the same period last year. IMS Research, recently acquired by IHS Inc., has been tracking quarterly changes in this market since 2009. Over the years, the first quarter has proven to be seasonally slow, but never has it shown negative growth year-over-year.

The UPS service market includes service contracts, warranties, installation, battery replacements and preventive maintenance on UPS hardware. Growth trends in the UPS service market closely follow those seen in the UPS hardware market, which, according to IMS Research’s UPS hardware tracker, slowed down in the fourth quarter of 2011 and slowed down further in the first quarter of 2012.

Service revenues tend to lag hardware revenues by roughly a year. For example, while UPS hardware revenue growth slowed in 2008, service revenues continued to grow strongly until 2009, when the service market finally felt the effects of decreased hardware sales. The lag is attributed to the nature of service contracts, which are typically attached to UPS 12-18 months after sale of the UPS itself. Given that contracts account for roughly half of the total market, the effect is significant.

UPS Service vs. UPS Hardware Revenue Growth. Source: IMS Research

The outlook for the global market may not be so dim given that much of the decline is confined to Europe, whose economy continues to struggle. The weakening of the Euro against the dollar inflated the decline year-over-year for that region, since revenues are aggregated in US dollars. The Americas has a slightly better picture with positive growth year-over-year in Q1. Asia showed the greatest percentage increase year-over-year of the three major regions, as tends to be the case with most markets for data center infrastructure that IMS Research tracks. Liz Cruz, the analyst for this market, suggests that “much of the explanation for the slow quarter can indeed be attributed to seasonality and that Q1 is the slowest quarter for services. However, if the UPS hardware market growth continues to slow, service revenues in 2012 may grow significantly less than in 2011, when they increased by 15 percent.” 

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