$12.9bn: Server market on the up

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

Revenue in the server market grew by 3.5 per cent worldwide in the third quarter, coming to $12.9bn, 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.

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

For the past few 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, virtualisation 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 per cent, 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 $4.3bn in server revenue, or around 33 per cent of the total, up 6.8 per cent from the same quarter the year before.

Number four Sun Microsystems also continued to rebound. Sun's server revenue grew 15.8 per cent to $1.3bn. Sun accounted for 10 per cent of the entire market. In the second quarter, Sun's revenue from servers grew by 15.5 per cent compared with the same period a year ago. Number two HP saw a slight decline in revenue from the year before, while Dell grew revenue by 3.8 per cent, or slightly faster than the market.

Dell accounts for 10.5 per cent of revenue in the server market, or about $1.4bn of the total.

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

Michael Kanellos writes for CNET News.com