H-P to Serve Automobile Club - Analyst Blog

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Hewlett-Packard Company ( HPQ ) recently announced another win for its Enterprise Services unit. The tech giant clinched a 5-year service deal with the Royal Automobile Club of Cataluña (RACC). Financial details of the deal were kept confidential.

Well equipped with 2,000 professionals, a fleet of 2,500 vehicles, aircraft and medical helicopters and a 24-hour phone service, the RACC is engaged in providing emergency breakdown support to its more than million annual subscribers.

H-P's services will help RACC improve its efficiency and productivity through proper management of the IT applications. Leveraging the enterprise services, RACC will be able to focus on increasing the quality of its services, while optimizing costs and driving growth within the organization.

Years of expertise and quality services have forced customers to select H-P Enterprise Services. Earlier this month, the U.S. Department of Veterans Affairs extended a service deal with H-P. In February, H-P signed a service deal with the U.S. General Services Administration for a sum of $48.0 million, under which the company is helping the agency in managing personal details of 500,000 federal employees. H-P was also awarded a service deal extension by the North Carolina Department of Health and Human Services for an undisclosed amount.

H-P delivered a 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 a growth of 2% year over year.

Despite winning a gamut of service deals, H-P's services did not perform well in the past few quarters. We have noticed that a huge amount of deals come from the government vertical. The contract prices of these government deals are not encouraging enough to drive revenue growth.

We are concerned regarding the last quarter results, which lacked luster 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 focus shift to the higher-margin cloud computing arena. This will be beneficial to H-P since the company 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.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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