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Analyst Blog

Technology giant Hewlett-Packard Co. (HPQ - Analyst Report) or H-P is all set to usher in a new era of server experience with its ‘HP ProLiant Generation 9 (Gen9)’ server systems to meet the growing demand for cloud computing and Big Data. H-P looks quite confident with Gen9 as it is expected to surpass the benefits of traditional server systems in every possible way.

This cost-effective bundle helps to reduce complexities associated with the management of IT assets, lowers data loss and accelerates data transfer. It will be available across multiple locations from Sep 8.

HP ProLiant Generation 9 has been designed and customized to reduce workloads at an optimum speed that should result in enhanced performance and flexibility. The server runs on Intel Corp.’s (INTC - Analyst Report) yet-to-be released Xeon E5-2600v3 processors. The usage of chips will not only save space and energy but also reduce costs. The new offering is also helping H-P to gain an edge over its competitors.

H-P dominated the server market in the second quarter of 2014, per IDC’s Worldwide Quarterly Server Tracker, followed by IBM (IBM - Analyst Report), Dell, Cisco (CSCO - Analyst Report) and Oracle (ORCL - Analyst Report). We believe that these product launches will enable the company to maintain its leadership position.

As a matter of fact, H-P expanded its market share to 25.4% from 25% in the year-ago period and revenues increased 4% on a year-over-year basis. Notably, in the second quarter, revenues from the server market increased 2.5% year over year to $12.6 billion.

H-P’s server revenues were positively impacted by higher revenues from x86-based ProLiant servers, which more than offset the continued decline in revenues from its Itanium-based Integrity server. H-P retained its leading position in x86 servers and Blade servers commanding a 29.6% and 42.2% revenue share in the second quarter of 2014, respectively.

Reportedly, H-P is taking aggressive steps to increase its share in the x86 server segment since IBM sold its x86 server business to Lenovo. The sale of IBM’s x86 server business has created an opportunity for H-P as it is tapping into IBM’s customer base. This should strengthen its footing in the server market and generate incremental revenues, going forward.

Moreover, H-P’s traction in the cloud, security and Big Data segments is expected to drive growth, going forward. We believe that the company’s strategic focus on the software business will help it to diversify beyond PCs. Nonetheless, macroeconomic challenges and tepid IT spending remain near-term concerns.

Currently, H-P has a Zacks Rank #3 (Hold).