Hewlett-Packard Surges in Servers

The company closes the gap with IBM.
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SAN FRANCISCO

Hewlett-Packard

(HPQ) - Get Report

continued its conquest of the server market, turning in the strongest growth among the field of competitors in the third quarter, according to the latest industry scorecard.

And while Wall Street is fretting that a souring economic picture might crimp corporate spending on technology, server sales are not suffering yet.

"Any implications from financial market instability were not visible in the server market in the third quarter," said Errol Rasit, an analyst at the industry research firm Gartner, in a statement accompanying Monday's report.

Overall, global shipments of servers during the quarter increased 8.7% year over year, while revenue rose 2.6% to $13.4 billion.

For Palo Alto, Calif.-based H-P, strong sales of industry standard servers based on x86 microprocessors, as well as of the more expensive so-called business critical system servers resulted in impressive revenue and unit growth in the July-to-September period.

H-P captured 28.1% of the server market by revenue, narrowing the gap with

IBM

(IBM) - Get Report

, which was the No. 1 player with 30.1% share. A year ago, IBM had 33.7% share vs. H-P's 25.3%.

Investments that H-P has made in its account coverage and "go-to-market activities" are paying off across the server business, according to Gartner.

H-P boosted its server revenue roughly 14% year over year and its shipments 20%.

Last week,

H-P beat Wall Street expectations, delivering a 28% gain in its bottom line during its fiscal third quarter, which encompasses a slightly different time frame from that measured by Gartner.

IBM experienced negative growth in both server revenue and unit shipments, according to Gartner.

The report had some good news for

Dell

(DELL) - Get Report

, which is scheduled to report its fiscal third-quarter results on Thursday. According to Gartner, Dell saw double-digit revenue growth and a slight increase in its market share measured by revenue.

Sun Microsystems

(JAVAD)

also notched decent revenue growth but experienced a 4.5% decline in unit shipments, which Gartner ascribed to the company's focus on product margin instead of volume.

According to Gartner, the need for additional computing brawn to power corporate data centers and strong demand from emerging economies are driving global server purchases.

These trends, says Gartner, are offsetting the effects of virtualization software made by companies such as

VMware

(VMW) - Get Report

, which allow customers to get more efficiency out of their existing servers rather than buying more hardware.