Chicago (IL) - Sales in the worldwide server market declined slightly in the fourth quarter of 2005, but were high enough to push the annual sales result to a new record high of $51.3 billion, according to market research firm IDC. AMD more than doubled its x86 server processor shipments and market share in 12 months and emerged as the clear winner of the segment.

Fourth quarter server revenues fell 0.2% year over year from $14.51 billion to $14.48 billion, which was the first decline since the first quarter of 2003. However, there was positive news in IDC's report as well: Server shipments increased by 10.6% during the quarter and annual sales inched up to a new record high from $49.12 billion to $51.29 billion.

Revenues from volume server systems continue to be the catalyst for the server market, gaining 7.3% year over year. In contrast, revenue for midrange enterprise servers declined 11.5% year over year and the high-end enterprise server market showed a 1.7% decline year over year, the fifth consecutive quarter of declining revenue for high-end enterprise servers.

IDC said that Q4 2005 results showed an x86 server market that continues to see "strong growth." Factory revenue for x86 servers grew 6.7%, while unit shipments grew 13.7% to 1.8 million servers. According to the market research firm, HP led the market with 33.4% revenue share due to strong revenue growth of 10.1% compared to Q4 2004. The fierce competition between Dell and IBM for the second position in the x86 market ended in a statistical tie, with IBM and Dell each holding approximately 20% revenue share for the fourth quarter, IDC said.

In another x86 battle, AMD confirmed a general expectation that the company continues to gain ground on Intel's server processors. While Intel was able to increase its shipments by about 7% over Q4 2004, AMD's Opteron shipments jumped by 154%. IDC analyst John Humphreys told TG Daily that AMD's market share in the x86 server market increased from 4.9% in Q4 2004 to about 10.9% in Q4 2005. Humphreys did not provide absolute numbers of processors shipped. Market share numbers, however, indicate that AMD sold between 190,000 and 200,000 Opteron processors during the quarter, while between 1.6 and 1.7 million Xeon processors were shipped from Intel's factories.

According to Humphreys, AMD's Opteron processors continue to gain acceptance due to its superior performance, heat and power consumption characteristics. While it is speculated that much of the growth could come from companies delaying purchase decisions because of Intel's new chip generations expected to be introduced in the third quarter of this year, Humphreys believes that many buyers are switching because of the Opteron's features: "There are projects which require systems today," he said.

While he declined to comment on recent rumors that Dell may be adopting AMD's processors, he said that the company becomes much more a topic to talk about: "At 10% market share, it is going to put pressure on Dell," he said.

In terms of operating systems, the Windows server market showed solid growth, with factory revenues increasing by 4.7% year over year. Overall, Windows servers accounted for $4.9 billion in 4Q05, representing 33.6% of quarterly server market revenue. For all of 2005, Windows server revenues were $17.7 billion, which means that for the first time the Windows server segment modestly exceeded spending for Unix servers.

Linux servers generated $1.6 billion in quarterly revenue, the fourteenth consecutive quarter of double-digit growth, with year-over-year revenue growth of 20.8%. For the full year, Linux server revenues were $5.7 billion. Unix servers experienced a 5.9% decline in factory revenue year over year to $5.0 billion for the quarter with worldwide Unix revenues for the quarter representing 34.3% of overall quarterly factory revenue.

IBM maintained the top spot in the server vendor ranking. The company posted a 38.4% revenue share in the fourth quarter. HP came in second with 26.8%. Dell followed with 9.6%. Sun, ranked fourth, posted an 8.2% revenue share and was the only server chip company in the Top 4 to post a year-over-year revenue decline. In terms of shipments, HP maintained the number 1 position worldwide with a 30.2% share, followed by Dell with a 23.3% share.