DELL Dell Inc. (MM)

Hewlett-Packard Co. (HPQ) has reportedly inked a five-year information technology (IT) infrastructure outsourcing service agreement with a renowned shipping company Maersk Line. The contract would bring in more than $150.0 million for H-P.

Maersk Line, the largest company in the A.P. Moller – Maersk Group, is the largest container shipping company in the world. Its fleet comprises more than 500 vessels and provides the most reliable ocean transportation services.

H-P said that it will create a private cloud computing environment for Maersk’s distributed and local applications using its cloud computing solutions. The service is intended to reduce IT costs and increase functionality of the company’s server room. H-P will also take care of the Service Desk function while supervising Maersk’s computing devices. As part of the agreement, H-P will offer employment to the entire Maersk Line staff within these areas.

We believe that H-P’s success at Maersk Line could prove to be win-win for both the companies. The shipper will be able to perform better with more elasticity in technology infrastructure, which will enable it to deal with competitive pressure. H-P on the other hand could learn from the experience to win similar deals from the shipping vertical.

H-P has cut some more service deals in the past few months. Mortgage solutions provider Loan Value Group LLC selected H-P’s services for five years. The Australian government selected H-P’s technology service to design, build and maintain a portion of the information, communication and technology systems of the digital hospital.

We see H-P’s service line of business is doing well. This can be inferred from the segment’s results in the latest quarter. The Services and Financial Services segments witnessed revenue growth of 2.0% and 18.0%, respectively.

However, the overall result was doomed due to lackluster performance in the storage and computing segments.

We also remain cautious about the company’s future growth, particularly as competition from other big technology players, such as Cisco Systems Inc. (CSCO), Apple Inc. (AAPL), Acer and Dell Inc. (DELL) heats up. Moreover, the expected decline in PC shipments stemming from the hard disk drive supply cut due to the Thailand flood is raising investor confusion over the stock.

H-P now has a short-term Sell recommendation (Zacks #4 Rank).

 
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