HP unit expects shift toward blade servers to accelerate

Thursday, February 24, 2011

The Multi-Country Area (MCA) region of HP (NYSE: HPQ) expects cloud computing adoption and falling costs to accelerate clients' march from rack to blade servers this year, HP MCA's enterprise servers, storage and networking director, Alfredo Yepez, told BNamericas.

Blade servers currently account for 20% of the division's unit shipments and 40% of all sales in dollar terms, but Yepez said both percentages are on the rise.

"There is a change in the mix", he said. "Within our cloud computing strategy, we promote the idea of having clients base their cloud computing infrastructure on the purchase of blade servers."

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Price is also at the top of clients' minds when it comes to purchase time, according to the executive.

"We have dedicated a lot of time to optimizing our supply chain, using the same components throughout the entire manufacturing process," he said. "This gives us more negotiating power with component providers, and that translates into lower costs for us and lower prices for clients."

Chile, Argentina and Colombia represent the three geographies that have driven MCA's server sales so far this fiscal year, and HP expects to score the division's most significant market share advances during upcoming quarters in those three countries. Adoption is being driven by both medium and large enterprises in verticals such as telecommunications and government.

HP MCA currently estimates its server unit market share at 55-58%, Yepez said.

The tech giant is also stoking blade server sales because of their higher returns, as it can tack on related software and services in product combos bundling blade servers, according to the executive.

"It's convenient for us as a company because blade has more profitability," he said. "It's a product that leaves us with healthier margins because the client also buys them with administration and management software and automation. Virtualization also adds a lot."

HP MCA saw servers, storage and networking sales increase 22% year-over-year during the fiscal first quarter, which ended January 31, and Yepez said he expects the division's year-long sales increases to reach roughly the same percentage.

Globally, HP's fiscal first quarter net profits increased 16% year-over-year to US$2.6bn, while the firm saw its revenues grow 4% to US$32.3bn in 1Q11. Growth was driven by an 11% sales advance in the BRIC countries.