Mon, Jun 08, 2015 - Page 14 News List

Hewlett-Packard turns threat into profit on servers

Bloomberg

Hewlett-Packard Co (HP) has found a way to turn one of the greatest threats to its business into a source of revenue.

The company has booked more than US$1 billion in sales of a range of low-cost servers made in partnership with Hon Hai Precision Industry Co (鴻海精密) since starting a joint venture with the Taipei-based company in May last year, HP enterprise group head Antonio Neri said in an interview on Wednesday.

That is small relative to the size of HP’s main server business, which includes sales from the joint venture, and brought in US$12.5 billion in fiscal 2014.

However, it means that HP has figured out how to sell this equipment to some of the world’s largest computer operators, such as Google Inc, which typically turn to Asian companies such as Quanta Computer Inc (廣達).

These lower-cost servers, manufactured by companies known in the industry as original device manufacturers, or ODMs, made up 8.2 percent of server sales worldwide in the fourth quarter, a 31 percent increase from a year earlier, according to a March report by International Data Corp.

Although the joint venture with Hon Hai, known in China as Foxconn Technology Group (富士康科技集團), is a lower-margin business, it is profitable and fast-growing, HP chief executive Meg Whitman said an interview.

“Not all service providers buy from ODMs,” she said. “Google does. Some others do. Microsoft, they buy from ODMs, as well as us.”

Since starting the joint venture, Palo Alto, California-based HP and Hon Hai have sold to a number of customers around the world, including in China, Neri said.

One of the deals was the sale of more than US$200 million in servers, Neri said.

“It’s been a great success,” Neri said. “We have won many, many large deals around the globe.”

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