DELL Dell Inc. (MM)

The world’s largest manufacturer and exporter of personal computers, Hewlett Packard Company (HPQ) has recently secured apurchase agreement from the U.S. Air Force (USAF).

As part of the blanket purchase agreement issued by USAF Information Technology Commodity Council Semi-Annual Enterprise, the government department will buy Digital Printing and Imaging capabilities, which will be utilized by the USAF for the procurement of IT products and services. As per the deal, HP will provide a variety of regular and multifunction printers (MFPs).

These are pre-installed Multi Functional Printers (MFP’s), with enhancements such as the HP Universal Print Driver, USAF-approved security settings and use of a Common Access Card Reader to support authorized use and more secure operations. Moreover, the agreement also incorporates provisions for HP Original Toner, installation services and a four-year Care Pack warranty, which includes enhanced technical support. With this renewed agreement, Hewlett-Packard marks the continuation of a relationship, which has survived over a period of 20 years.

Hewlett-Packard is currently on a roll as it continues to win several deals and contracts.  Recently, the company secured a 10-year outsourcing contract worth $380.0 million from Healthways Inc. As per the terms of the agreement, the PC maker will provide applications development solutions and IT management services to Healthways. The deal is expected to strengthen the relationship between the companies and help them pursue new opportunities in the government and commercial markets.

The company’s growth story remains intact given its track record of new deal wins and acquisitions. The company recently signed a deal to acquire Printelligent, a closely held provider of managed print services (MPS) for an undisclosed sum.

Moreover, 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.

It seems that the company is undergoing significant structural changes, given its longer lead time and services selling and lengthy revenue recognition cycle. We are expecting a change in the process during fiscal 2012. On the other hand, we believe that the PC business will remain solid going forward.

Despite the company’s leading market position and compelling product line, we remain cautious about future growth, especially as competition from other big technology players, including Cisco Systems (CSCO), Apple Inc. (AAPL), Acer, Microsoft Corp. (MSFT) and Dell Inc. (DELL) heats up.

However, we discourage investment in the shares considering the lowered revenue outlook, reflecting moderate demand for desktop PCs, manufacturing problems in Japan and the growing popularity of tablets, which is eating into its core computing market. Moreover, HP lags its peer Apple in the tablet vertical.

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

 
APPLE INC (AAPL): Free Stock Analysis Report
 
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
 
DELL INC (DELL): Free Stock Analysis Report
 
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
 
MICROSOFT CORP (MSFT): Free Stock Analysis Report
 
Zacks Investment Research