Cloud Hosting

Cloud computing has emerged as a key focus area for all the information technology companies across the globe, and Hewlett-Packard Company (HPQ) is no exception. The company has recently announced a new cloud computing solution in a bid to revamp its business.

The new cloud-based service enables clients to deploy private, public and managed clouds in a traditional information technology atmosphere, helps address the business needs of several existing and prospective clients and is compatible with all the latest technologies used by various companies.

The new offering from the technology major is expected to help the airline industry to develop an integrated platform for airline reservations and travel. Moreover, the Cloud bursting capabilities help external clients to access the blocks of external cloud capacity through the HP Cloud System, Amazon Web Services and Savvis. It is also expected to help in arranging new tools to manage technology across various cloud environments. The new offering includes a printing system that enables driverless printing from mobile devices.

The demand for a reliable cloud solution has increased in recent times with enterprises thinking seriously about the cloud option. The development and use of public clouds is not an easy process. This is where HP steps in as a service provider and offers its public cloud that small telecom providers can resell.

The recent acquisition of Autonomy was a step in this direction as its private cloud is expected to be fully utilized by HP. The Autonomy private cloud surpassed more than 50 petabytes of Web content, video, email and multimedia data and is spread across 6,500 servers at 14 global data centers. The Autonomy cloud also facilitates automatic data recognition architecture.

Although Hewlett Packard continues to march ahead with its cloud strategy, the ensuing courtroom battle with long-time partner Oracle Corp. (ORCL) is likely to weigh on investor sentiment. Though lawsuits encircling patent infringements and violation of contract terms are common in the tech sector, we think that the legal battle between these two giants will be a major issue.

With arguments going both for and against the company, the result of the trial is highly uncertain. In the meantime, its server business will continue to take a beating.

Hewlett-Packards second quarter 2012 earnings per share exceeded the Zacks Consensus Estimate, but both earnings and revenues declined on a year-over-year basis. Results were negatively impacted by exchange rate fluctuations, greater mix of low-margin products and competitive pricing in its hardware business. Its recently-announced restructuring initiative is encouraging however and should improve margins going forward.

However, HP continues to see challenges in its printer business. Also, margins in the services business are likely to remain weak this year and the macroeconomic trends as well as the competitive pressure remain headwinds.

Currently, HP has a Zacks Rank #3, implying a short-term Hold rating.

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New Cloud Offering from HP