Taiwanese contract makers Quanta Computer Inc (廣達電腦) and Wistron Corp (緯創) are the two players best positioned to benefit from the cloud computing server market that is expected to boom in the next three years, according to a report issued on Tuesday by Morgan Stanley.
As companies shift from on-premise to managed or public cloud environments, x86 server share leaders Dell and Hewlett-Packard are at risk of losing market share to Asian original design manufacturers (ODMs) like Quanta and Wistron, which ship servers directly to some of the largest cloud services vendors, the report said.
“We see a significant shift in the competitive landscape between on-premise server sales, which typically benefit the top three x86 server OEMs — Hewlett-Packard, Dell, IBM — and the managed or cloud server sales, which increasingly benefit ODMs in Asia, including Quanta and Wistron,” the brokerage said.
Some cloud service providers have decreased the percentage of servers ordered from top server vendors from as much as 75 to 100 percent historically to 50 percent to date, and the brokerage believes the impact of the changing cloud computing business will cause Hewlett-Packard and Dell to grow more slowly than the overall server market over the next several years.
As a result, the brokerage has downgraded Hewlett-Packard to “equal-weight” and retained “underweight” status for Dell, while it gives promising prospects to Quanta and Wistron.
There are two specific shifts caused by the cloud that benefit Quanta and Wistron — direct hardware order placements from Internet service providers (ISPs) and telecommunications companies, and total hardware and software solutions for cloud services.
Quanta, the world’s biggest contract laptop maker, is predicted to double its server sales year-on-year, accounting for 5 percent of total sales and 10 percent of profits at the end of this year, the brokerage said.
Earlier this month, Quanta predicted servers for cloud computing and tablet PCs would take a 30 percent share of its total revenue this year compared with the 20 to 25 percent of last year.
Server sales of Wistron, Quanta’s smaller rival, will account for 4 percent of this year’s total sales and 8 percent of profits, with server sales starting to show stronger momentum in the second half of this year, growing at least 20 percent year-on-year next year, the brokerage projected.
Among major IT companies in the US, Europe and the Asia-Pacific, the percentage using the public cloud is expected to rise from 28 percent to 51 percent in three years, while the portion of their workload running in the cloud will likely more than double from 10 percent to 22 percent.
The number of servers shipping into public-cloud environments will grow at 60 percent annually through 2013, as this migration of workloads from on-premise environments to the public cloud will continue to be a key driver in technology spending, the brokerage said.