H-P Retains #1 Spot in Server Market - Analyst Blog

Hewlett-Packard HPQ remained the number one vendor in the server market in the first quarter of 2014, per IDC's Worldwide Quarterly Server Tracker. H-P had finished at the top spot in 2013 as well, both in terms of revenues and market share.

Although H-P's first-quarter revenues from servers were down 2% on a year-over-year basis, the company held on to its 26.5% market share, which was flat year over year.

It is worth noting that per IDC's estimates, IBM IBM and Dell, the other two vendors in the top three, not only lost market share but also witnessed revenue declines during the period. IBM's market share was down from 25.1% to 19.1%, while revenues declined 25.4% year over year. Dell's market share was down from 18.2% to 18% with revenues declining 3.2%.

Meanwhile, Cisco CSCO and Oracle ORCL witnessed an increase in market share as well as in revenues. Cisco's market share increased from 4% to 5.7% and revenues increased 37% year over year. Oracle's revenues increased 1.9% from the year-ago quarter while its market share increased from 4.7% to 4.9%.

Now, coming back to H-P, the company's server revenues were impacted by continued decline in revenues from its Itanium-based Integrity server which more that offset higher revenues from x86-based ProLiant servers. H-P retained its leading position in x86 servers and Blade servers commanding a 29.6% and 43.7% share in revenues in the first quarter of 2014, respectively. 

Reportedly, H-P is taking aggressive steps to increase its share in the x86 server segment since IBM sold its x86 server business to Lenovo. H-P is also tapping the current IBM customers. The company is utilizing this opportunity to strengthen its footing in the server market which could generate incremental revenues, going forward.

Moreover, H-P's traction in the cloud, security and big data segments are expected to be the growth catalysts, going forward. We believe that the company's strategic focus on the software business will help it to diversify beyond PCs.

The company's probable entry into the 3D printing market should be another growth catalyst given the rapid adoption of 3D technology across industries. Nonetheless, macroeconomic challenges and tepid IT spending remain the near-term concerns.

Currently, H-P has a Zacks Rank #3 (Hold).

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