In a recent release by IDC regarding the worldwide server market in Q1’11, HP (NYSE:HPQ) came out on top with a 31.5% market share. IBM (NYSE:IBM) finished a close second with a 29.2% market share. Other big players in the server market - Dell (NASDAQ:DELL), Oracle (NASDAQ:ORCL) and Fujitsu (PINK:FJTSF) – placed 3rd, 4th and 5th respectively. We have previously written about how server market leadership matters more to HP than IBM (See Growth in Server Shipments Means More to HP than IBM).
Servers (both industry and high-end combined) contribute almost 11% of our $54.70 price estimate for HP’s stock. Our price estimate currently stands well ahead of market price.
Server Market Remains Strong, Cloud Poses Concerns
Factory revenue in the worldwide server market rose by 12% year-on-year, raking in $11.9 billion in the first quarter of 2011 as server unit shipments increased 2.5% year over year to 1.9 million units. [1]
While the global server market remains strong, the shift to “cloud” (where more units of servers are sold into hosted data centers, rather than enterprise offices) is posing concerns to the broader market. This could result in a 1% decline in server units sold over the next three years. [2]
We currently forecast that HP’s industry server shipments will increase from an estimated 2.8 million in 2010 to over 3.2 million by the end our forecast period. However if the shipments actually decline by 1% over the next 3 years and continue to do so in the future as a result of a shift to the cloud, it would suggest downside to our $54.70 price estimate for HP’s stock.
See our full analysis of HP stock here
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