HP’s Converged Systems Speed up IT Deployment & Cost Less

June 13th, 2011 by Trefis Team
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HPQ: Hewlett logo
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HP Converged Systems

Source: HP

Hewlett-Packard (NYSE:HPQ) announced new additions to its “converged systems” platform that combines hardware, software and tailored services. The goal is to create a packaged deal of sorts that companies can buy that combines networking, computing, and storage into a single unit. In one example, HP claims that these containerized servers called EcoPods, can be deployed in about 12 weeks and uses 95% less energy than traditional data centers. [1] This announcement is an extension of HP’s new business solutions as it looks to outpace competitors like IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), SAP (NYSE:SAP) and Dell (NASDAQ:DELL) in these markets. [2]

If we drill down to servers in particular, we anticipate the average price of an HP server will decline to  $3,300 by the end of our forecast period while Trefis members forecast a smaller decline reaching $4,200.

We have a Trefis price estimate of $54.70 for HPs stock, implying upside of around 50% to current market price.

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HP Announces Converged Data Center

HP is focusing on building pre-configured, complete systems which will bundle servers, storage, networking, software into one unit. These bundled systems can be deployed quickly with minimal integration needed. With the new system, you can add around 4,400 servers in just 12 weeks! And it comes at one-fourth the cost and saves energy compared to the traditional brick-and-motor data centers. [2] The “converged infrastructure” architecture emphasizes interoperability, virtualization and common management platforms – which are key to HP’s cloud strategy.

Competition Will Keep Prices Suppressed

While HP is making big strides in the server business, it faces fierce competition from Orcale’s Exadata servers as well as IBM’s WebSphere. With the overall networking industry shifting to “cloud,” it will become all the more difficult for HP to differentiate its products from rivals that are all geared toward making cloud-based products. While this trend will greatly benefit consumers, it’ll likely continue adding downward pressure on server prices.

Our complete analysis for HP’s stock is here.

Notes:
  1. HP announces converged storage strategy, products, Computerworld, June 6, 2011 [↩]
  2. Worldwide Server Market Revenues Increase 12.1% in First Quarter, IDC, May 24, 2011 [↩] [↩]