TAIPEI-- Hewlett-Packard Co. and the world's largest electronics
contract manufacturer Foxconn are launching a joint venture to make
servers aimed at major service providers, as both look to make
inroads in a server market in flux after moves by Asian
competitors.
The rise of big data is driving demand for servers to store
large amounts of information. Research firm IDC predicts that the
market for big data infrastructure and services will rise to $16.1
billion this year, growing six times faster than the broader IT
market.
While H-P is the world's top server vendor with a 28% share of
the market in the fourth quarter of 2013, according to IDC, it has
kept an eye on new Asian competitors. International Business
Machines Corp. sold its low-end server business to China's Lenovo
Group Ltd . this year for $2.3 billion. Meanwhile, Taiwan contract
manufacturer Quanta Computer Inc. has started to compete with its
Western clients by selling servers under its own brand, offering
competitive prices.
Taiwan's Foxconn, which manufactures the majority of the world's
iPhones and iPads, has been looking for a way into the server
market to help it expand beyond low-margin contract manufacturing.
Foxconn, officially named Hon Hai Precision Industry Co., announced
a partnership earlier this month with China's 21Vianet Group, an
Internet data center operator, to provide equipment and services in
China and overseas.
For H-P, the move comes as it is doubling down on its hardware
business, in a bet to turn around the company. H-P's Chief
Executive Meg Whitman told The Wall Street Journal in February that
she saw the server sale by IBM, H-P's largest rival, as an
opportunity to gain market share.
The co-developed line of servers will specifically address
computing requirements of both H-P and Foxconn, the companies said
in a joint statement Wednesday without disclosing financial terms.
H-P will also continue to make its own servers.
The two companies said they are specifically targeting major
service providers. The move may be to counter Taiwan's Quanta,
which has won server contracts in recent years from the likes of
Facebook, Amazon and Rackspace.
"Cloud computing is radically changing the entire supply chain
for the server market as customers place new demands on the breadth
of design capability, value-oriented solutions and large-scale and
global manufacturing capabilities," said Terry Gou, Foxconn's
chairman in the statement.
Foxconn has invested in a number of fields in the past year in
an effort to diversify its business from contract manufacturing.
The company said last month it is investing $30 million in a
software development unit and another $42 million to set up a new
components unit in China. It has also invested in a plant in the
U.S. to make automotive components and is making a push into the
telecom industry.
Write to Eva Dou at eva.dou@wsj.com
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