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Server market picks up a bit

Revenue sees its largest growth spurt in four quarters, despite pressure from lower prices and virtualization software.

The server market grew in the third quarter, despite pressure coming from low prices and virtualization software.

Revenue in the server market grew by 3.5 percent worldwide in the third quarter, coming to $12.9 billion, according to IDC. That's the largest growth spurt in four quarters and the largest third-quarter increase since 2000, when the tech-buying binge of the dot-com days was in its final throes.

Server blades were one of the primary drivers of growth, though at $738 million, blades still represent only a fraction of the overall market. Blade revenue shot up nearly 30 percent in the third quarter while unit shipments of blade servers went up about 25 percent. Revenue from high-end servers grew by 9 percent. Revenue from low-end servers, however, only grew by 3.8 percent, while mid-range server revenue declined by 2.3 percent.

For the past several quarters, server revenue across the industry has been somewhat flat. Prices continue to drop on hardware, forcing server makers to sell more hardware just to stay even. Meanwhile, virtualization software, enabling IT managers to run two or more operating systems on the same server, has eroded demand for more new boxes.

Unit shipments increased by 7.4 percent, more than twice as fast as revenue. Nonetheless, it is the ninth consecutive quarter of slowing shipment growth, according to IDC.

IBM remained atop the server pile and accounted for $4.3 billion in server revenue, or around 33 percent of the total, up 6.8 percent from the same quarter the year before.

No. 4 Sun Microsystems also continued to rebound. Sun's server revenue grew 15.8 percent to $1.3 billion. Sun accounted for 10 percent of the entire market. In the second quarter, Sun's revenue from servers grew by 15.5 percent compared with the same period a year ago. No. 2 Hewlett-Packard saw a slight decline in revenue from the year before, while Dell grew revenue by 3.8 percent, or slightly faster than the market.

Dell accounts for 10.5 percent of revenue in the server market, or about $1.4 billion of the total.

Servers based around chips from Intel and Advanced Micro Devices accounted for $6.6 billion. The share of x86 servers increased by 4.8 percent and continued to erode the Unix/RISC market. In x86 servers, AMD saw server revenue grow nearly 80 percent. AMD now accounts for 19.8 percent of x86 server revenue. Intel accounts for 80.2 percent and, though Intel lost share on a year-to-year basis, it regained some lost ground from the second quarter.