HP Wins $1.4B Contract - Analyst Blog

Computing major Hewlett-Packard & Co. (HPQ) announced that its German unit has clinched a five year technology infrastructure outsourcing contract from E.ON's IT GmbH. E.ON's IT GmbH is the information technology (IT) and telecommunications subsidiary of Germany-based utility company E.ON AG. HP will receive a handsome $1.4 billion for the project.

Under the terms of the agreement, HP will directly handle data center services and workplace services for more than 80,000 E.ON employees. HP will also be the operational integrator working conjointly with E.ON's other key IT suppliers, to help the utility company better focus on its core operations.

E.ON AG is the world's largest power and gas company by sales. HP shares a long-standing relationship with E.ON as the latter's technology equipment supplier as well as support services and managed print services provider.

Of all the major European utility companies, E.ON has pioneered in outsourcing its technology infrastructure. With the success of the project, the company will be able to deliver efficient client services. This could prove to be an opportunity for HP as other companies take the same path.

HP has a strong business model, and still rules the computing world, with leadership positions in both PC and Server segments. Hewlett-Packard is also positioned to challenge networking leader Cisco Systems Inc. (CSCO) and may take some share in the networking market. The company also expects to benefit substantially from the revival in the US economy. Despite the company's market position and compelling product line, we remain cautious about future growth, especially on the consumer side.

Currently, HP has a Zacks #3 Rank, which translates into a short-term Hold recommendation.

 
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