HP Partners With Foxconn to Make Cloud-Optimized Servers

Apr 30, 2014 10:49 AM EDT | Matt Mercuro

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Hewlett-Packard and electronics manufacturer Foxconn Technology have joined together to create low-cost servers in cloud data centers.

The cloud-optimized servers will help service providers cut costs, the companies said in a joint statement.

Companies expected to benefit from the servers includes Facebook, Apple and Google.

Traditional server vendors like IBM and HP have had mixed results selling to those companies in the past, who increasingly buy directly from Asian contract manufacturers like Wistron and Quanta, which are more capable of achieving low-cost production.

A number of analysts believe that the partnership allows HP to keep Foxconn as an ally instead of potentially seeing it become a threat, according to PCWorld.com.

Foxconn is the parent company for Hon Hai Precision Industry Co Ltd, best known for producing Apple's iPhone devices. The company is gaining experience as a server maker, and has said on more than one occasion that it wants a larger piece off the business.

"The challenge for the established server vendors is that they risk becoming increasingly over-engineered and overpriced as the data center evolves, and this is HP's attempt to circumvent that challenge," said industry analyst Andrew Butler, a Gartner vice president, according to the joint release.

HP and Foxconn failed to give many specifics about the partnership in the release.

They did confirm that they'll jointly design cloud-optimized servers that will be marketed, sold and supported by HP, and manufactured by Foxconn.

They have created a "non-equity joint venture" that takes effect on May 1.

The deal will allow HP to be a much bigger player in the scale-out market as well, where most of the growth in servers is taking place, according to Moor Insights & Strategy analyst Patrick Moorhead.

"Success will depend on the ultimate cost and flexibility model both HP and Foxconn can bring to the table," Moorhead said, according to PCWorld.com.

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