HP Wins $2.5B NASA Contract

Computing major Hewlett-Packard & Co. (HPQ) announced that it has won a ten-year information technology (IT) contract from NASA for a total value of approximately $2.5 billion. HP sealed the contract after beating global security and advanced IT company Lockheed Martin Corp. (LMT).

The contract allows HP to service and manage the computers at NASA. The Enterprise Services segment of HP will provide, manage and secure required IT services crucial for the NASA workforce to support its core business, scientific, research and computational activities.

The contract provides HP with the opportunity to serve the U.S government’s space and aeronautics research center. Moreover, edging out Lockheed Martin in this contract gives HP Enterprise Services a shot in the arm. Lockheed Martin, an aerospace, defense, security and advanced technology company, has remained a prominent service provider for the U.S. Department of Defense and the U.S. federal government agencies. At present, the company is providing NASA with IT products and services.

The contract value is also encouraging as it secures streams of revenue for several quarters. While more such government deals are expected, we believe HP will remain well positioned with high-value deals from other sectors. Recently, the German unit of HP clinched a five-year technology infrastructure outsourcing contract from E.ON’s IT GmbH worth $1.4 billion.

Hewlett-Packard has a strong business model and rules the computing world, with leadership positions in both PC and Server segments. The company is also positioned to challenge the networking leader Cisco Systems Inc. (CSCO) and may take some share away in the networking market. The company also expects to benefit substantially from the revival in the U.S. 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.

HEWLETT PACKARD (HPQ): Free Stock Analysis Report

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