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Server Sales Slip Away

Fourth-quarter revenue fell 0.2% from a year earlier.
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The server market, a longtime pillar of growth for the technology industry, is showing signs of a slowdown.

For the first time in nearly three years, factory revenue declined slightly in the fourth quarter of 2005 to $14.5 billion, according to a report released Wednesday by IDC.

Not surprisingly,

Sun Microsystems

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bore the brunt of the slowdown among publicly traded companies, with server revenue dropping nearly 11% to $1.2 billion.


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fared the best, growing revenue by 7.3% to $1.4 billion, while


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, which remained in first place, grew its revenue by 0.8% to $5.5 billion.

Blade servers (multiple servers in a single chassis) were a bright spot, with factory revenue up 57% year over year to $667 million in the quarter, though still just 4.6% of total market revenue. Here too, IBM held the lead with a market share of 43%;


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was No. 2 with a share of 35%, and Dell was third at 11.2%, according to IDC.

Analyst Mathew Eastwood of IDC said the fourth quarter of the year is traditionally the strongest, yet server revenue declined 0.2% year over year. In part, the decline reflects a tough comparison, because the last quarter of 2004 was very strong. Even so, "we did see signs of some weakening of the market," Eastwood said in an interview.

He noted that Sun is in the midst of shifting to volume servers based on x86 technology ( industry-standard chips from


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Advanced Micro Devices

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) and away from its traditional proprietary designs. Sun's so-called volume server revenue increased by 69% to $100 million. Volume servers are priced below $25,000.