According to a report by analysts IDC, quarterly sales of servers running the Linux operating system topped $1bn (£533m) for the first time during the third quarter of 2004.
With year-on-year revenue from Linux server sales up 42.6%, Linux accounted for more than 9% of the $11.5bn in servers sold worldwide during the quarter, which ended 30 September, the research firm said.
The server market as a whole grew by 5.5% compared with last year's figures, an indication that IT spending is on the rise from the conservative levels that IDC has tracked over the last few years, said Vernon Turner, group vice-president and general manager of enterprise computing with IDC.
"We see server spending continuing to be very strong, but more importantly, it's stronger than the rate of inflation," he said. "Chief executive officers are finally saying, 'Lets get beyond normal replacement cycle.'"
Strong sales of both Linux and Microsoft's Windows operating system fuelled an 18.2% growth rate for "volume systems", which tend to be powered by Intel and Advanced Micro Devices' x86 processors. Windows server revenue grew by 13.3% year on year, IDC said.
When measured by revenue, IBM remained the number one server suppliers with $3.66bn in revenue, or 31.7% of the server market. Hewlett-Packard was second with $3.09bn in revenue.
Dell was the fastest-growing server supplier, with revenue jumping 14.1% from its figures the previous year. The company finished the quarter with $1.17bn in server sales, only slightly less than number three server supplier, Sun Microsystems, whose revenue for the quarter was $1.18bn up 0.1% from the previous years figures.
Sales of midrange servers priced between $25,000 and $500,000 - traditionally a strong area for Sun's Unix systems - were down 10.2% for the quarter, reflecting a shift toward volume systems, according to Turner.
"The ongoing concern is what happens in the midrange Unix market in the long run," he said. "Are those platforms vulnerable to Linux replacements by platforms like Opteron?" he asked, referring to AMD's 64-bit server processor.
Sales of blade servers hit $287m during the quarter and now account for 2.5% of the market, IDC said. Shipments of blade servers were up 44% from last year and IBM was the top blade supplier, with 44.2% of the market.
When measured by number of units shipped, HP was the top supplier with 471,000 units shipped during the quarter. Dell and IBM were in second and third place with 347,000 and 259,000 units shipped, respectively. With 81,000 servers shipped, Sun actually saw the number of units it shipped decline by 0.9% from the same quarter the previous year.
Robert McMillan writes for IDG News Service