HP Extends Service Agreement

Hewlett-Packard’s (HPQ - Analyst Report) Enterprise Services announced that Ahold, an international group of leading supermarket companies based in the United States and Europe, has signed a seven-year infrastructure and applications services agreement, thereby expanding its previous agreement.

Under the agreement, HP will provide management and support services for Ahold’s global data center environment, which includes mainframes, servers and storage. In addition, HP will implement HP Business Service Automation to make Ahold’s server and storage capabilities more robust.

Ahold will use HP ProLiant rack servers, HP StorageWorks XP Disk Arrays as well as HP ProCurve 2610 and 5412 switches. HP will help reduce the complexity and improve the efficiency of Ahold’s technology environment.

HP will also provide network services to Ahold across Europe and the United States for a wide range of the latter’s critical business and administrative applications.

Highlighting its performance, HP has experienced significant growth across its ProLiant, Integrity and BladeSystem family of servers and server blades. HP had earlier announced that 40 European customers have successfully migrated in the past year from legacy mainframe systems to HP Integrity servers, achieving data center cost savings of up to 70.0%.

HP’s continued strong market share is further evidence of customer confidence in HP Integrity servers as a preferred alternative to mainframes.

With significant cost savings, deployment of additional sales resources to capture incremental opportunities in the enterprise and mid-markets, a diverse global customer base and a broad portfolio that is aligned with growth areas of the market, we believe HP will continue to grow its top and bottom lines.

Despite the progress made by HP within its Software and Services business, the company has its share of hurdles. For instance, the Technology Solutions Group (TSG) competes with International Business Machines (IBM - Analyst Report), which has much larger global services and software businesses and a strong position in the servers and storage market. This apart, HP encounters stiff competition from Cisco Systems (CSCO - Analyst Report), Dell (DELL - Analyst Report) and Sun Microsystems (JAVA).

We maintain our Neutral rating on the stock.

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