February 23, 2005 2:25 PM PST

IBM extends lead in server market

IBM continued to march ahead of rivals in 2004 in server sales, a key market in the computing industry, making gains in models using x86 chips and the Unix operating system.

Big Blue's server revenue increased 9.3 percent to $16.1 billion from 2003 to 2004, according to figures released Wednesday by research firm Gartner. That growth outpaced the overall market, which grew 7.2 percent to $49.5 billion.

Dell grew faster, increasing revenue 20 percent to $4.8 billion. That wasn't enough to pass No. 2 Hewlett-Packard, which grew 6.7 percent to $13.4 billion, or No. 3 Sun Microsystems, which shrank 4 percent to $5.2 billion.

Servers are powerful networked machines that handle tasks such as storing e-mail, hosting Web sites, making airline seat reservations or recording bank transactions. Comprising a strategically significant market in the computing industry, servers are at the heart of customers' businesses, come with plumper profit margins than many other products and influence purchases of other computing equipment.

IBM has been tops in the market for years. It fended off an attack by Sun, which soared in the late 1990s but fell back afterward. Big Blue is now targeting Dell with higher-end x86 servers and HP's Itanium-based products with its Power5 processors.

"IBM was able to take advantage of the Power5 servers in upgrading its current installed base as well as upselling current (Intel server) users," Gartner analyst Mike McLaughlin said.

IBM showed gains in the Unix server market, which overall declined 2.8 percent to $16.2 billion in 2004. IBM's share increased from 24.3 percent to 26.7 percent at a time when Sun dropped from 32.6 percent to 31.8 percent and HP dropped from 31.9 percent to 30.2 percent.

HP has suffered in Unix as it transfers its systems from its own PA-RISC processor to Intel's Itanium. "The increase of Itanium has not

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