H-P HQ
In a recent release by IDC regarding the worldwide server market in Q1 2011, Hewlett-Packard came out on top with a 31.5% market share. IBM finished a close second with a 29.2% market share. Other big players in the server market - Dell, Oracle and Fujitsu - placed third, fourth and fifth, respectively.
We have previously written about how server market leadership matters more to H-P than IBM.
Servers (both industry and high-end combined) contribute almost 11% of our $54.70 price estimate for H-P's stock. Our price estimate currently stands well ahead of market price.
Server Market Remains Strong, Cloud Poses Concerns
Factory revenue in the worldwide server market rose by 12% year-on-year, raking in $11.9 billion in the first quarter of 2011 as server unit shipments increased 2.5% year over year to 1.9 million units. [1]
While the global server market remains strong, the shift to cloud (where more units of servers are sold into hosted data centers, rather than enterprise offices) is posing concerns to the broader market. This could result in a 1% decline in server units sold over the next three years. [2]
We currently forecast that HP's industry server shipments will increase from an estimated 2.8 million in 2010 to over 3.2 million by the end our forecast period. However if the shipments actually decline by 1% over the next 3 years and continue to do so in the future as a result of a shift to the cloud, it would suggest downside to our $54.70 price estimate for HP's stock.
See our full analysis of HP stock here
Notes:
- Worldwide Server Market Revenues Increase 12.1% in First Quarter as Market Demand Continues to Improve, IDC [↩]
- HP: Morgan Stanley Says Hold, ?Clouds? Gathering In Server Land, blogs.barrons.com [↩]
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