H-P Itanium Servers for EC

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Hewlett-Packard Co (HPQ) recently announced to have sealed a deal with European Commission (‘EC’) for an undisclosed sum. Per the deal terms, the Commission will deploy a host of servers from H-P to enhance its information technology (‘IT’) environment.

The European Commission is the executive body of the European Union (‘EU’) responsible for proposing legislation, implementing decisions, upholding the Union's treaties and day-to-day administrative affairs of the EU. EC has 27 member-states operating under its jurisdiction. With the help of H-P’s Integrity Servers, the Commission will be able to deploy large mission-critical applications within its IT systems to help make decisions faster.

Introduced in Nov 2012, H-P’s Integrity Server features Intel Corp.’s (INTC) Itanium chips, which run on Oracle Corp.’s (ORCL) software. The Itanium chips help in boosting processing speed for all computing applications. Combining the Itanium chips and H-P’s enhanced UX operating system software, these Integrity Servers are able to process computing transactions as much as three times faster than previous Itanium-based servers and at the same time save more energy.

The advantages of the cost-effective servers forced EC to select H-P over other applicants. Along with the servers, EC will also adopt H-P’s technology services and other related hardware/software support solutions to ensure a secure and reliable IT ecosystem.

H-P’s Itanium-led servers faced great challenges before getting marketed. Assuming that Intel could stop the manufacture of Itanium chips due to its feared obsolescence, Oracle decided to stop developing software needed to run Itanium chip-based servers. H-P, being the major consumer of Itanium chips, was in a soup following Oracle’s decision. But after a series of hearings, a California appeals court decided to reject Oracle’s decision and directed the company to maintain its contractual obligations with H-P.

But the fact remains that Itanium chips are really expensive and are used in high-end servers due to which most organizations prefer to use Advanced Micro Devices Inc.’s (AMD) 64-bit x-86 chip and Intel’s x86-based Xeon server chip family. Hence, the slower adoption rate for Itanium chip-led servers could be a negative for H-P, going forward.

Though further indication of PC market slump in 2013, declining revenues and competition from Dell Inc. (DELL) are concerns, back-to-back product launches, growing exposure into enterprise storage space and continuous deal wins are encouraging.

Currently, H-P has a Zacks Rank #2 (Buy).

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