Hewlett-Packard Company
(
HPQ
) recently clinched an information technology (
IT
) services deal with Defense Information Systems Agency (DISA) for
a period of 7 years. The agency is a unit of the U.S. Department of
Defense (DoD) and is responsible for providing the required IT and
communications support to various federal offices such as
President, Vice President and Secretary of Defense.
The deal was awarded under the agency's Encore II contract and
carries a value of $39.8 million. Per the contract terms, H-P will
act as the prime contractor in the development of a program for
DISA to help it detect and restrict any system error while ensuring
secured exchange of data among the various governmental
agencies.
Moreover, H-P will implement its Assured Compliance Assessment
Solution across the DoD's IT ecosystem to facilitate deployment of
various software applications after passing the agency's formatted
compliance levels.
In March, technology solutions provider Sabre Holdings opted for
H-P's enterprise services for 6 years to ensure a scalable and
efficient technology infrastructure. Also, the U.S. Department of
Veterans Affairs extended a service deal with H-P retaining the
company as the prime contractor for its Compensation and Pension
Record Interchange support program. The tech giant also clinched a
5-year service deal with the Royal Automobile Club of Cataluña for
an undisclosed sum.
Despite consistent wins, H-P delivered marginal 1.0%
year-over-year growth in its Services revenue in the first quarter
of 2012. Within the segment, Technology Services revenue increased
2%, Application and Business Services revenue was flat and IT
Outsourcing revenue recorded growth of 2% year over year.
As a matter of fact, H-P's services have not seen much growth in
the past few quarters. This could be because of the fact that a
large number of deals come from the government vertical. Since
government contracts usually go to the most competitive bidder,
they generally take time to get approved and also don't come at
attractive prices. Another problem with Fed deals are the
constrained budgets due to uncertain macro environments.
We are concerned about last quarter's results, which were
lackluster compared with the year-ago period. But we are looking
forward to the implementation of Meg Whitman's strategies and are
encouraged about H-P's shift in focus to the higher-margin cloud
computing arena. This will be beneficial to H-P since it is not
making desired profits from its legacy PC business. Nevertheless,
the tech giant continues to lead
Dell Inc.
(
DELL
) and
Apple Inc.
(
AAPL
) in the PC market.
Currently, H-P has a Zacks #3, implying a short-term Hold
recommendation.
APPLE INC (
AAPL
): Free Stock Analysis Report
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DELL
): Free Stock Analysis Report
HEWLETT PACKARD (
HPQ
): Free Stock Analysis Report
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