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Figures for the third quarter, released by analyst group Gartner, showed worldwide server sales had slumped from £9.97bn a year ago to £7.64bn.
The US was hit the hardest in the third quarter, dropping 29.4% from the same period last year.
In worrying news for Sun Microsystems, which is one of the largest vendors of Unix-based servers, sales of computers running the high-end operating system have dropped faster than the overall market.
Lower end systems with Intel chips, which generally run either Microsoft Windows or Linux, held up better.
IBM continued to dominate the market with £2.3bn in sales, more than double that of each of its closest rivals, Compaq, Sun and HP, which had sales of around £1bn apiece.
IBM increased its market share by 7% to 30.3% and HP's share climbed by a modest 0.1% to 13.1%. Sun's share, however, dipped by 3.6% to 13.7%, while Compaq's share slipped by 1.9% to 13.8%.
To shore up its market-leading position IBM was the first to react to the downturn in server sales, announcing plans to offer zero percent finance to solution providers selling its xSeries servers to clients.
The promotion, which will run until 31 December this year, will allow clients working direct with IBM or via IBM business partners to apply for the interest-free financing on the servers, as well as any direct-attached storage and PCs sold as part of a solution with the servers.