After a long wait, Palo-Alto based tech behemoth Hewlett-Packard Company (HPQ - Analyst Report) decided to make its cloud computing services public with its second quarter results. The announcement was made by an internal source to New York Times magazine. The announcement was in sync with H-P’s intention to shift its focus on the higher-margin cloud computing arena.
As per the internal executive’s statement, H-P is about to air its cloud services, which are expected to be similar to the cloud platform offered by renowned online retailer Amazon.com Inc.’s (AMZN - Analyst Report) Web Services.
Amazon.com operates as an online retailer internationally. Additionally, the company serves developers through Amazon Web Services (AWS), which provides access to technology infrastructure that developers can use to enable various types of virtual businesses. All services over AWS are billed on usage, but how the usage is measured for billing varies from service to service.
H-P assured that it will not be competing over prices, but plans to provide structured and unstructured databases and data analytics as a service. These services were inherited from Autonomy Corp., which was acquired in August 2011 for a handsome consideration of $10.3 billion. With Autonomy, H-P became a strong contender in the $55.0 billion business analytics software and services market.
Though H-P down not intends to fight over prices, its services could face stiff competition, going forward. Amazon is planning to launch an unstructured "noSQL" database as a service, while IBM Corp. (IBM - Analyst Report) is dealing with various analytics services in the cloud.
Apart from this, the H-P cloud will offer some programming languages such as Ruby, Java and PHP. In this respect, the tech giant would be up against Microsoft Corp. (MSFT - Analyst Report), Google Inc. and Salesforce.com Inc. (CRM - Analyst Report).
Shifting focus from the traditional low-margin PC business to the high-margin storage and cloud computing business has become critical to H-P’s success. H-P’s effort was apparent from its two most pricey acquisitions. The company took over storage vendor 3Par Inc. at a hefty $2.35 billion. The second purchase was that of Autonomy, a smaller software company.
3Par was a perfect fit for H-P’s Converged Infrastructure portfolio, which brings together servers, storage and networking products to manage data centers from a common platform and ultimately help to transform an organization’s IT into the cloud.
H-P’s cloud infrastructure is popular among its customers. But its software- as-a-service offering may take some time to ramp, as it will be first used by the existing customers.
H-P’s venture is encouraging but it will take some time to take off. This apart, lackluster PC demand and Meg Whitman’s yet-to-be proven strategies keep us on the sidelines.
Currently, H-P has a Zacks #3 rank, implying a short-term Hold recommendation.