Hp leads the server market

HP Leads the Server Market

Everything seems to be going in favor of the biggest computer manufacturing company Hewlett-Packard (HPQ). As per the recent report published by the technology research firm Gartner, HP generated $3.4 billion in server revenues during the first three months of the current year, up 16% on a year-over-year basis.

On the other hand, during the same period, the server revenue of International Business Machines (IBM) slipped 2.1% to $3.05 billion.

The performances of the two companies in the last quarter put HP in the leadership position, with a 31.5% market share, surpassing IBM’s market share of 28.4%.

After overtaking all its competitors in the PC market, the tech major has now taken aggressive measures and ended up grabbing the top slot in the server business. HP has already strengthened its networking line of business by grabbing another networking company 3Com Corporation (COMS).

Enterprise Storage and Servers (ESS) is the biggest business within the Technology Solutions Group (TSG). The segment has benefited from its move to Industry Standard Servers (ISS), changing the product mix within the ESS group.

During the second quarter of 2010, ESS revenue rose 31.0% year over year, driven by the increase in Industry Standard Server revenue, which moved up 54% year over year. We believe that with the revival in the macroeconomic scenario, and strengthening of IT spending, this segment should do well in the ensuing quarters.

The company rolled out encouraging second quarter numbers, exceeding the Zacks Consensus Estimate, while revenue continued on an upward trend. HP anticipates third quarter revenue to remain in line with the second quarter.

Although we remain bullish on the HP’s performance going forward given the improving demand and the company’s leadership position in the PC segment, we are not very confident about a considerable improvement in the company’s printing business, due to availability of cheaper substitutes.

We maintain our Neutral rating on the stock.

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