The largest PC manufacturer Hewlett-Packard Company (HPQ) recently 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.

This deal win is expected to strengthen the relationship between the companies and help them pursue new opportunities in the government and commercial markets.

Healthways is expected to take advantage of health care applications offered by HP in order to provide public sector health insurance programs with expertise in designing and delivering well-being-improvement solutions.

The HP growth story remains intact given the company’s 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.

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.

On the other hand, management believes that the Services division will focus on more profitable and higher-growth categories, mostly in the cloud computing service segment. However, this may result in a conflict of interest among major tech players such as International Business Machine (IBM), Oracle Corp. (ORCL) and other tech majors who have already entered this competitive space.

Moreover, the company lowered its third quarter guidance based on the negative impact of the earthquake in Japan, along with the reduction of sales of personal computers, and lower operating profit in its services unit as a result of reorganization of its business units.

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 challenging Cisco Systems Inc. (CSCO) in the networking space.

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 prefer to remain on the sidelines considering the lowered revenue outlook, reflecting moderate demand for desktop PCs, manufacturing problems in Japan and growing interest in tablets. Moreover, HP lags its peer Apple in the tablet vertical.

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

 
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