HPE could be saying farewell to the cloud server business after reports that the company will no longer sell low-end servers to some of its biggest clients, including the likes Microsoft and Amazon.
The move seems to have a financial motive, as it can be extremely hard to turn a profit selling low-end servers in this way. Although HPE sells a lot of servers, the big players in the field, who buy these servers at bulk, are capable of negotiating huge discounts, making profits almost non-existent. To make matters even worse, most of them, including Google or Amazon, reach out to contract manufacturers in the East and have their servers built right there. Removing the brand name, they get all the necessary specification, with much lower costs.
That is why HPE president Antonio Neri announced on Wednesday that the company will cease these activities. This does not mean, however, that it still won’t sell high-end servers to Tier 1 companies.
Ever since CEO Meg Whitman took over, HPE has been forcing high-end storage and servers into large corporations. It is also pushing ‘converged hardware’, combining both storage and servers into a single unit.
According to Fortune, this can be a “very profitable business”, but the problem is – many of its target companies (Fortune 500) are losing interest in their own data centres, and are opting for services like AWS, Microsoft or Google.
Fortune reminds us that IBM has had a similar dilemma and has ended up selling its Intel-based server business to Lenovo three years ago.
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