Dell announced its entry into the ultra-compact blade server market today with a new line of innovative hardware that features book-sized blocks--blades--of processors, memory, and disk storage that slide into a central chassis. Dell's PowerEdge 1655MC line targets businesses that need to run multiple small servers or want to consolidate four or more servers into one chassis. The company says that the solution can pack twice as many processors into the same space as its previous servers.

Pricing for the new Dell servers starts at $7800 for a unit with four blades and can run as high as $25,000 for a chassis with six blades, each with two processors. Users can outfit the servers with Windows 2000 Server or Red Hat Linux. The two-processor units are available immediately, and four-processor blades will ship in mid-2003, the company says.

Dell hopes to improve its server market share with its entry into this hotly contested market. Although the company is the number one PC maker, it ranks fourth (7.7 percent of the market) in the server space, with sales of $814 million in third quarter 2002. Server market-leader IBM still owns a commanding lead: The company reported server sales of $3.4 billion last quarter and owns more than 32 percent of the market. Hewlett-Packard (HP) and Sun Microsystems, the number two and three players, respectively, lost market share in the quarter. At $2.5 billion, HP's sales are down 11 percent, giving the company 24.5 percent of the market. Meanwhile, Sun saw sales drop 10 percent to $1.3 billion; the company now owns 12.6 of the server market.