Hewlett-Packard (HPQ) will provide single-function and multi-function printers to the United States Air Force (USAF) under a multi-year Blanket Purchase Agreement. The five-year agreement also entails the company to provide all printer-related consumables, for USAF’s Digital Printing and Imaging initiative (DPI). Incidentally, Hewlett-Packard was selected for the DPI initiative in 2008 as well.
The printers that will be provided to the Air Force will include multi-function printers such as HP LaserJet Enterprise M4555fskm and HP Color LaserJet Enterprise Flow M880z and single-function printers like HP LaserJet Enterprise 500 color Printer M551dn, HP LaserJet Enterprise 600 Printer M 603dn and HP LaserJet Enterprise P3015dn Printer.
It is worth noting that revenues from the Printing segment were down 4.3% year over year to $5.83 billion in the last-reported quarter (second-quarter 2014), primarily due to lower supplies revenues (down 6% year over year).
Despite the revenue decline, total hardware units sales increased 1% year over year due to higher ink and laser hardware unit sales. The segment’s commercial hardware revenues were down 1%, while consumer hardware revenues were up by a similar percentage.
The current contract bodes well for the company as having federal government departments as major customers lends stability to the segment and moderates fluctuations in revenues. Although government agencies generally have a lengthy approval process, once approved, these projects contribute to the top line for a number of years.
In addition, government contracts improve the visibility of future revenue streams. Furthermore, Hewlett-Packard’s technology and flagship products are being used by various departments of the federal government.
Moving on, Hewlett-Packard’s traction in the cloud, security and Big Data segments are positives. The company’s strategic focus on the software business will help it to achieve long-term profitability. Moreover, restructuring initiatives to rationalize costs are expected to improve the company’s profitability in the long run.
However, continuing macroeconomic challenges, tepid IT spending and competition from IBM (IBM) and Oracle (ORCL) are near-term headwinds.
Currently, Hewlett-Packard has a Zacks Rank #3 (Hold). Investors can also consider Micron Technology (MU), which has a Zacks Rank #2 (Buy).
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