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Intel server sales show signs of life

The market for standard servers, which include systems running Linux or Microsoft Windows with an Intel processor, break through the economy's malaise, according to market research.

Intel servers may be on the road to recovery, according to a new report.

The market for standard servers, which include systems running Linux or Microsoft Windows with an Intel processor, have broken through the economy's malaise, IDC said.

Third quarter sales grew for the first time since early last year, reaching $5 billion in revenue. That represents an 8.6 percent sequential increase from the second quarter and a 4.7 percent jump from a year ago, IDC said.

Intel servers are important products for PC makers such as Dell Computer, IBM, and Hewlett-Packard because they represent a large portion of each company's quarterly sales. Customers use the machines to handle jobs like running e-mail systems or conducting electronic transactions.

Dell, for example, recently said that strong sales of servers and storage led it to increase its revenue targets for the third quarter.

While acknowledging improvement in Intel server sales, IDC isn't ready to declare a bull market yet. Much of the growth was driven by inexpensive models, purchased in small numbers by companies in the United States or the Asia-Pacific region that were looking to shore up their current computing capacity, IDC said.

"We are not saying that the server market has broken free from the economic freeze," Vernon Turner, an IDC server analyst, said in a statement. "IT enterprises are buying only the minimum amount of incremental capacity to get the job done. But this represents the first step toward improving market conditions."

Sales in Latin America, Western Europe and Japan are still slow, IDC said.

Meanwhile, any revenue growth in the third and fourth quarters will serve only to offset declines earlier in the year and net a flat yearly performance for the market category.

IDC predicts slow growth for the server market as a whole. The firm forecasts that server revenue will grow at a rate of 3 percent over the next five years, reaching $63.4 billion by 2006.