HP Eyes Big Opportunity in Catering to Small Businesses

HP (NYSE:HPQ) recently announced new services, technology and an expanded entrepreneurial support for small and medium sized businesses (SMBs) aimed at providing them with a broad range of technologies to reduce costs, improve efficiency and ensure collaboration for greater employee productivity. New solutions include products like servers, storage systems, network switches and software solutions. HP primarily competes with other leading technology solution providers like IBM (NYSE:IBM) and Dell (NASDAQ:DELL).

We currently have a $47.50 Trefis price estimate for HP, about 35% above the market price.

Small and Medium Businesses — a BIG Market Opportunity

According to HP’s estimates, SMBs facing challenges like controlling costs, managing employee productivity and gaining access to credit, represent an estimated $234 billion in total addressable market.

Since the addressable market is huge, the new solutions that are mostly product features are likely to boost sales across a number of HP product lines. New solutions include entry-level servers, network switches and storage solutions. ^{[1] [2]}

We estimate servers, storage and networking together contribute nearly 20% to HP’s and an increase in their sales driven by launch of new solutions would result in an upside to our $47.50 Trefis price estimate for HP.

HP Software to Benefit

HP also announced a number of software solutions like Business Decision Appliance and Business Data Warehouse Appliance for business intelligence and real-time data analysis as well as Business Risk Mitigation (BRM) and Branch Office Consolidation (BOC) for business protection.

A good market response to HP’s new solutions for SMBs would mean an increase in the firm’s software sales which, according to our estimates, make up just about 5% of the company’s value.

See our full analysis of HP

1. new products include the ProLiant ML110 G7 and ProLiant DL120 G7 servers and HP Networking standards-based V1810-48G switch and the V1410 switch series and the HP P2000 G3 Modular Smart Array [↩]
2. HP Fuels Growth, Innovation for Small and Midsize Businesses, HP [↩]