Foxconn, HP Form Server Venture Driven by Cloud-Computing

Foxconn Technology Group and Hewlett-Packard Co. agreed to form a venture making servers targeted at cloud-computing providers.

Both companies plan to jointly develop and manufacture a series of the large-scale computers that store and process data, Taipei-based Foxconn said in a statement. The products will be in addition to Palo Alto, California-based HP (HPQ)’s existing ProLiant range of servers, it said.

Foxconn, the world’s largest custom electronics maker and assembler of Apple Inc. (AAPL)’s iPhone and iPad, is investing in cloud computing, software and networking amid slowing revenue from electronics and PC assembly. HP, which contracts Foxconn to make some of its products, seeks to win business from data center operators such as Facebook Inc., Google Inc. and Amazon.com Inc. that store and deliver content to their consumers.

“The high-volume design and manufacturing expertise of Foxconn, combined with the compute and service leadership of HP, will enable us to deliver a game-changing offering in infrastructure economics,” HP Chief Executive Officer Meg Whitman said in the statement.

Foxconn already makes computers, laptops and servers for HP and built a dedicated notebook factory for the U.S. company in Chongqing, China.

The new venture is a non-equity commercial agreement which commences May 1, according to the statement. Pricing and product availability will be announced later.

Server Growth

Hon Hai Precision Industry Co. (2317), the largest company in Terry Gou’s Foxconn group, last year posted a 1.2 percent increase in revenue, missing the founder’s target for 15 percent growth. Revenue and profit will rise this year as Foxconn develops automation and cloud computing, Gou said in January.

“Cloud computing is radically changing the entire supply chain for the server market,” Gou said in the statement.

HP relies on servers and related services to drive profits with its Technology Solutions Group accounting for 48 percent of revenue and 53 percent of operating income last year, according to data compiled by Bloomberg.

Foxconn and Hon Hai don’t provide revenue or profit breakdowns.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Suresh Seshadri, Robert Fenner

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