Hewlett-Packard (NYSE:HPQ) has been investing continuously to shun the company’s PC dependence for quite some time, the latest being the company’s $50 million investment in embracing big data platform more tightly. Will the endeavour help HP in boosting its revenue as a whole? Let’s check it out.
HP Joining the Hadoop League
Last week, the personal computer maker announced a partnership with software firm Hortonworks, and also purchased a 5% stake in the company. Hortonworks is the only company that specializes in development and distribution of the Apache Hadoop platform, and provides support for the software. Apache Hadoop is an open-source software framework that supports storing and processing large scale data (or big data) across a group of computing hardware.
With this equity investment, HP is actively taking part in developing Hadoop architecture, an area that has been already explored by tech stalwarts such as Microsoft (NASDAQ:MSFT), Red Hat (NYSE:RHT), Teradata (NYSE:TDC), and SAP (NYSE:SAP). Additionally, the company plans to enrich their partnership by broadening its go-to-market collaboration.
- Warning! GuruFocus has detected 5 Warning Signs with HPQ. Click here to check it out.
- HPQ 15-Year Financial Data
- The intrinsic value of HPQ
- Peter Lynch Chart of HPQ
HP will integrate Hortonwork Data Platform (HDP) with its existing ‘HAVEn’ big data platform, which was introduced in June 2013. HP HAVEn platform is a comprehensive solution including software, services and infrastructure. This recent partnership will amplify the platform’s performance by combining Hortonworks’ Apache Hadoop software, which is expected to boost customer acceptance of its big data solution.
Demand for Big Data Solutions and Hadoop is Growing
Big Data is a term coined to represent a collection of huge and complex data set that are difficult to process manually or using traditional data processing tools. Transformation of big data into valuable information can help turn businesses into more profitable ones, and Hadoop is proving to be an important technology to manage big data in cloud. As demand for solutions such as this is expanding, software developing firms are increasingly foraying into the space to monetize the opportunity coming from the enterprises.
Software giants such as International Business Machine and Oracle are using software developer firm Cloudera’s platform to provide big data solutions. HP, along with Hortonworks, will now be able to compete with the tech biggies in monetizing the big data opportunity more efficiently.
HP’s Software Revenue Could Grow
According to technology research firm Gartner, global enterprise software spending could grow 6.9% to $321 billion, which outpaces the growth rate of 2.1% for overall technology spending by far. The improvement would come from enterprises’ keenness to boost their respective Big Data as well as digitization initiatives.
HP has remained focused to strengthen its Software revenue and eventually the costliest acquisition in the company’s history was made – HP bought Autonomy for a knee-jerking $11 billion in 2011. As a result, contribution from this segment increased from 2.5% in 2011 to roughly 4%. The HAVEn platform includes capabilities from Autonomy and Vertica (acquired in 2011). Higher adoption of the company’s HAVEn solution would not only make better use of the acquired entities’ capabilities, but also boost the total contribution.
HP faced many challenges, stemming mainly from macroeconomic concerns and secular changes in the PC and printing markets. The company implemented various strategies to shift focus to high-margin enterprise space to generate growth. Its focus into the big data space could prove to be a windfall gain and help accelerate revenue growth.