Dell to Overshadow H-P Servers - Analyst Blog

Tech major Dell Inc. ( DELL ) is looking to grow its share of the server market, something that could hurt Hewlett-Packard Co. ( HPQ ) in the longer term. Dell missed its chance of becoming the leading PC shipment vendor after H-P's PC segment spin-off was called off by current CEO Meg Whitman.

The two companies saw their fortunes reverse in the last quarter, as Dell's server business did much better than H-P's. H-P has seen a few hurdles in the last few quarters. Even the recently concluded fourth quarter was lackluster. And now, we see H-P encountering another threat from its nearest competitor Dell.

Both companies have excelled in developing servers that bring the graphics processing unit (GPU) into the data center or high-performance computers (HPC). However, while H-P has mostly concentrated on the higher-end segment, Dell has been focused on the low end.

Yesterday, both Dell and H-P announced their newest technologies and ideas. H-P revealed a project named Odyssey, wherein the giant would implement the idea of combining the features of the UNIX operating system ( OS ) and its flagship x86 servers to provide a single server platform targeting the mission-critical computing segment, in which it has a rich experience of more than 25 years.

H-P reportedly is busy with the making of HP Integrity servers, HP NonStop systems and the HP-UX and OpenVMS operating systems. The yet-to-be released offerings feature Intel Corp. 's ( INTC ) Xeon processors, Microsoft Corp. 's ( MSFT ) Windows OS and LINUX OS.

Dell on the other hand, unveiled a suite of PowerEdge blade servers featuring the latest Opteron 6200 Series processors from Advanced Micro Devices Inc. ( AMD ). Dell asserts that this line of products will be far more competent than H-P's Proliant line of servers. The newest offerings are expected to be energy efficient, high speed performance gadgets suitable for various enterprise applications.

As per statistics provided by the U.S. market research firm Gartner during the second quarter of 2011, H-P topped its peers both in respect of revenue generated and shipments made. We don't have details of the third quarter. But on the basis of recently concluded quarters of the respective companies, we can see that Dell has performed much better than H-P.

Server and networking revenue increased 13.0% year over year, driven by continued momentum in server virtualization. Dell is being prudent in providing mission-critical services and solutions around the server, creating competitive differentiation, richer configurations and generating higher profits.

On the other hand, H-P witnessed a decline of roughly 4% in its Enterprise Servers and Storage & Networking segment. The decline was mostly due to the lackluster server business, which according to the company was due to a slower economic environment.

We see that heavyweights such as IBM Corp. ( IBM ) and Oracle Corp. ( ORCL ) are competing to lead in the server segment with newer technologies and products. Moreover, H-P is shifting focus to the enterprise software and service business in an attempt to stabilize its margins.

Given the increasing competition, there is every possibility of H-P losing its leading market position over time.

H-P has a Zacks #5 Rank, indicating a short-term Strong Sell rating. Dell currently holds a short-term Buy rating, as indicated by the Zacks #2 Rank.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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