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The number of server shipments worldwide grew nearly 9 percent in 2006, with Hewlett-Packard leading with 27.5 percent of the market, according to the latest study by Gartner.

IBM led the annual survey in terms of revenue, with $16.9 billion worth of server sales in 2006. That number represented a 1.7 percent increase from the year before, according to the Feb. 22 report.

Despite the fact that shipments totaled 8.2 million, an increase of 8.9 percent from 2005, overall revenue within the server market was nearly flat year-over-year. In 2006, server revenue stood at $52.7 million, an increase of only 2 percent from 2005.

According to Gartner, the x86 server market slowed in the fourth quarter of 2006, while IT administrators waited to evaluate newer systems based on quad-core processors.

Intel, the world’s largest supplier of microprocessors, introduced its quad-core Xeon 5300 series processors in November 2006. Intel’s main rival, Advanced Micro Devices, is scheduled to release its quad-core Opteron processors, code-named Barcelona, later in 2007.

“The slowdown really hit the x86 market in the fourth quarter,” said Jeffrey Hewitt, a research director at Gartner, based in Stamford, Conn. “You have a lot of new stuff coming out, with multicore products and the ongoing AMD versus Intel situation. This seems to have lengthened the sales cycle and clients are waiting to evaluate these new products before they decide on what to buy.”

Companies also bought fewer servers as the adoption of virtualization technology—the ability to run multiple applications and operating systems on a single server—continued to gain momentum.

“Virtualization did have an effect on the market but it was not as great an effect as the lengthening of the sales cycle,” Hewitt said.

Click here to read more about the virtualization market.

Of the top five server vendors, Sun Microsystems had the best turnaround from a year ago. In 2006, the company’s server revenue stood at $5.7 billion, an increase of 15.4 percent. Sun’s 10.8 percent revenue share in the global market placed the company third behind IBM and HP.

“By pushing its share ahead 1.2 percent to reach 10.8 percent, Sun reversed a yearly revenue share decline trend that had been occurring since 2001,” the report said.

Blades remained the hottest segment of the server market. The revenue for blades grew 36.5 percent, while the number of systems shipped worldwide grew 33 percent. Once again, IBM remained the blade leader with 41.1 percent of the market’s revenue, but HP managed to close the gap with a 32.5 percent share of the market. Together, the two companies totaled nearly thee-quarters of blade market revenue worldwide.

“The technology the two companies have developed with their blades is pretty strong and they have managed to make really strong and appealing products,” Hewitt said.

Click here to read more about the server market in the third quarter of 2006.

In addition, the Gartner survey showed that shipments of RISC-Itanium Unix servers had fallen 1.6 percent, while mainframes—a segment of the market dominated by IBM—had a revenue increase of nearly 4 percent.

Among the top five vendors, IBM had the greatest share of market in terms of revenue with 32.1 percent. HP was second with 27 percent, while Sun placed third with 10.8 percent. Dell and Fujitsu/Fujitsu Siemens rounded out the top five.

IBM was helped by the revenue growth of its System z and System x series, although revenue for its System p and System i series fell.

HP led all server vendors in shipments with 27.5 percent of the market. Dell was second with 21.7 percent of all worldwide shipments and IBM was third with 15.7 percent. Sun and Fujitsu/Fujitsu Siemens placed fourth and fifth respectively.

To take the top spot, HP was helped by shipments of its ProLiant servers, which grew by 8.5 percent, and its Integrity line, which increased 30.1 percent compared with last year. However, all other HP server shipments declined in 2006.

In the x86 market, HP was the leader in both revenue and shipments. Sun led the RISC-Itanium Unix server market in terms of revenue and shipments.

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