Hewlett-Packard Company (HPQ) recently finalized a customer support deal with the Corporation for National and Community Services (CNCS). The deal has a one-year base period with four one-year option periods and is valued at $22.5 million.
Under the terms of the deal, HP’s Enterprise Services unit will offer information technology solutions aimed at supporting voluntary services.
A U.S. federal agency, CNCS aims to inculcate the spirit of service and responsibility among Americans. With its Senior Corps, AmeriCorps and Learn and Serve America programs, the Corporation provides support and voluntary service to U.S. citizens.
HP’s customer support service will facilitate the Corporation in the consolidation of its customer contact centers into a single point of support to address all types of critical community queries. This would make CNCS more efficient by removing loopholes in its service, repetition in efforts and retaining important customer data, simultaneously enabling reporting using enterprise-wide metrics.
HP has been serving government verticals for a long time. The gamut of deals it enjoys gives the leading PC vendor a wide exposure to this space.
Latent challenges within government functions, resource and funding constraints increase regulatory dependence on voluntary services. To that end, we believe that regulatory bodies all over the world would look forward to leveraging the experience and expertise of HP.
We think that HP’s association with CNCS will add another feather to its Services segment. However, the deal amount is not encouraging enough to drive revenue growth, going forward.
Though we remain encouraged with HP’s lead position in both PC and Server segments, intense competition from other big technology companies, such as Cisco Systems Inc. (CSCO), Apple Inc. (AAPL), Microsoft Corp. (MSFT), as well as smaller Asian players keep us concerned.
Currently, HP has a Zacks #3 Rank, which translates into a short-term Hold recommendation.
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