Hewlett-Packard Company (HPQ) recently clinched a five-year services deal with the Australian Taxation Office (ATO). The deal has been valued at $500.0 million. The ATO administers the Australian taxation system and is the principal revenue collection agency for the Government.

As per the deal, HP’s Enterprise Services unit will offer centralized computing support to the ATO. HP’s service will include Data Center services, which will upgrade the ATO’s existing data center facilities, improving its services toward tax payers.

HP will also replace ATO’s existing range of servers with its Intel and UNIX-based servers. The ATO will also swap its storage with the proven StorageWorks P9500 storage suites from HP.

The HP-ATO association dates back to 1999. With support from HP, the agency will now be able to enhance its entire computing environment, thereby mitigating costs required to manage the technological infrastructure.

HP has been serving government verticals for a long time. The gamut of deals gives the leading PC vendor a wide exposure in this space. In March, HP signed three consecutive government deals:

The first was a four-year services deal with the U.S. Special Operations Command (SOCOM), for a value of $68.1 million. The second was a 5-year deal with the health care division of Nevada Department of Health and Human Services for a sum of $176.0 million. Under the third deal, HP’s IT support services were selected by the Corporation for National and Community Services (CNCS). The deal, valued at $22.5 million, had a one-year base period with four one-year extension options.

We think that HP’s association with the ATO and USSOCOM will bolster its position in the data center market. We believe that the organizations opting for data center consolidation or upgrade will opt for HP’s services.

Though we are encouraged by 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 is worth consideration.

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

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