H-P Extends Service for Veterans - Analyst Blog

By Zacks | November 21, 2012 AAA

Hewlett-Packard Company (HPQ) recently announced that it has been awarded a service deal extension by the U.S. Department of Veterans Affairs (VA). Per the contract, H-P will continue to extend support for operations and maintenance software applications for the agency's Veterans Health Information Systems and Technology Architecture (VistA) program. Financial details of the deal were kept confidential.

The Department of Veterans Affairs is engaged in the task of providing disability compensation, pension, education, home loans, life insurance, vocational rehabilitation, survivor benefits, medical benefits and burial benefits to military veterans and their families. The VistA program is targeted at improving the country's Electronic Health Record (EHR) services to provide better medical facilities to veterans.

H-P has been working on this VistA program for the past 10 years. The deal extension will require H-P to provide software testing services including defect remediation and table maintenance to support more than 100 applications running on the VistA program. The company's expertise will help the U.S. agency to decide and implement patient safety issues.

H-P has a long-standing relationship with this agency, which spans more than 14 years. H-P's technical expertise has led the U.S department to rely on its services time and again. In March, the agency extended a deal requiring H-P to provide business process analysis, testing services and overall project management along with software design, development and support services for its Compensation and Pension Record Interchange (CAPRI) support program.

H-P has been serving government verticals for a long time. The gamut of deals gives the leading PC vendor a wide exposure to this space. Though revenue streams from this sector are somewhat regular, the risks posed by low-margin businesses and federal budget cuts are high.

The growing uncertainties in its core computing market resulted in significant downward estimate revisions, on the basis of which H-P has a Zacks #4 Rank, implying a short-term Sell rating. The company's computing rival Dell Inc. (DELL) has a Zacks #5 Rank, implying a short-term Strong Sell rating. But, on the server side, Cisco Systems Inc. (CSCO) has a Zacks #2 Rank (short-term "Buy" rating), reflecting its first quarter 2013 earnings beat.

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