Sun outpaces 2006 growth in server market

Long-suffering server maker sees revenue gains after five years of declines.
Written by Stephen Shankland, Contributor
Sun Microsystems, bruised by years of trying to recover from the dot-com bust, saw revenue gains that beat server rivals in 2006, according to new figures.

The server company was the only one in the top five for the niche to have revenue growth that exceeded that of the overall server market, which registered a 2 percent rise last year, according to statistics from Gartner Group released Thursday.

Sun's revenue increased 15.4 percent to $5.4 billion in 2006, reversing the market share losses it has suffered every year since 2001. That total means it has now clawed back into third place in servers over Dell. For 2006, Sun had 10.8 percent of the total market, to Dell's 10.3 percent; Dell's revenue increased 0.4 percent to $5.4 billion.

Overall, the worldwide server market grew 2 percent to $52.7 billion last year, Gartner said. Unit shipments of servers rose 8.9 percent to 8.2 million.

IBM remained king of the heap, with 1.7 percent growth to $16.9 billion in sales. No. 2 Hewlett-Packard shrank 2.3 percent to $14.2 billion. At No. 5, the combination of Fujitsu and Fujitsu-Siemens dropped 7 percent to $2.5 billion.

Sun posted a strong fourth quarter in 2006, with growth in sales of both x86 and Sparc servers.

Servers using x86 processors, such as Intel's Xeon and Advanced Micro Devices' Opteron, have been a strong growth segment for years. But they lost momentum in the fourth quarter of 2006, Gartner analyst Jeffrey Hewitt said in a statement. He attributed the change to slowed purchases from customers, who were anticipating new models with quad-core processors. He also put it down to the effect of virtualization, which allows customers to replace multiple servers with a single server, running multiple operating systems in separate partitions called virtual machines.

HP retained its leadership in shipping the most units--2.3 million, well ahead of Dell at 1.7 million and IBM at 1.3 million.

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