DELL Dell Inc. (MM)

The leading personal computer manufacturer in the world, Hewlett Packard Company (HPQ) recently signed a deal to acquire Printelligent, a closely held provider of managed print services (MPS) for an undisclosed sum.

Managed printing services are attracting major industry players. Research firm Gartner believes that major players in the IT space are deploying this service to efficiently meet the customer’s printing requirements including printing equipment, supplies, service and the overall management of the printer fleet.

Hewlett-Packard is trying to capitalize on the MPS opportunity in a big way. According to recent research published by the technology research firm IDC, the deployment of MPS technology is particularly beneficial for mid-sized companies, with five-year projected compound annual growth rates of 14.0% to 23.0%. We are of the opinion that HP being a major player in the printing segment is expected to grab a major chunk of the MPS pie.

HP’s acquisition of Printelligent is a part of the company’s strategy to optimize the traditional technology environment that its customers depend on and deliver a connected world between the customer and the enterprise.

Printelligent boasts a presence in 39 states. Hewlett-Packard expects to complete the acquisition by the end of July. Post acquisition, Printelligent will be integrated into HP's imaging and solutions group and HP will have access to Printelligent’s customers, which generate about $26.0 billion in annual revenue.

Hewlett-Packard has always grown through strategic acquisitions. The company acquired data storage company, 3PAR in September 2010 for an average price of $33.00 per share, outbidding Dell in the process. The acquisition has enabled HP to strengthen its innovative Converged Infrastructure solutions.

Hewlett-Packard reigns supreme in the computing world with its strong business model and leadership position in both PC and Server segments. The company is also well positioned to challenge Cisco Systems Inc. (CSCO) in the networking space and gain significant market share.

Despite the company’s market position and compelling product line, we remain cautious about future growth, especially as competition from other big technology players, including Cisco Systems, Apple Inc. (AAPL), Acer, Microsoft Corp (MSFT) and Dell Inc. (DELL) heats up. We think that the increasing competition will increase pricing pressure, with the corresponding negative impact on profitability.

Currently, Hewlett Packardhas a Zacks #4 Rank, implying a short-term Sell recommendation.

 
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