Zacks_Analysts' Blog : H-P Wins Aussie Hospital Contract - Analyst Blog

The Australian government recently awarded the Australian arm of Hewlett-Packard Company (HPQ) a technology service agreement for its next-generation digital hospital in Adelaide, Australia. According to the agreement, Hewlett-Packard will design, build and maintain a portion of the information, communication and technology (ICT) systems of the digital hospital.

The new hospital will follow a public-private collaboration approach, with all modern amenities. It will be equipped with version 2.0 of the “HP Digital Hospital Solution”, as its technology foundation. This solution from H-P offers a cohesive set of technologies and services that replaces single-function systems, thereby aligning technology with operational and patient priorities.

Under this service agreement, H-P will design a collaboration between Royal Adelaide’s in-building systems with the South Australia Government’s enterprise level patient admission to facilitate real-time information accessibility.

The hospital care solutions offer a new growth area for H-P. The tech major is making substantial progress in this area and formulating strategies to grab a major share of this segment. Previously, H-P announced a 5-year plan to automate and upgrade its services for the Cardinal Santos Hospital, Manila. The hospital had chosen H-P to be their hardware solutions partner.



Moreover, the company is strengthening its foothold in the “Health Information Systems” segment. The BC Cancer Agency provides a cancer-care program for the people of British Columbia. The organization had deployed solutions featuring HP ProLiant DL360 servers, HP Modular Smart Array 30 storage and Bycast storage software across five facilities to form a distributed storage grid.

This solution helps around 1,000 clinic staff to access studies from the internal data base, picture archiving and communication systems and 53 external hospitals. Services include Bycast Professional Services and HP network storage and server services.

Alternatives for the PC Business

On the other hand, it is becoming more apparent that H-P’s PC market share is at risk since the company announced that it is evaluating strategic alternatives for the Personal Systems Group (PSG) business. The uncertainty regarding the future of the business could be the reason for caution at resellers and distributors, which are saying that customers are hesitating to move forward with PC purchases, with some switching to other brands.

As the lack of differentiation in the market becomes more apparent and price competition increases, the number of Asian competitors continues to increase. This is the likely reason for the company considering the spin-off and considering other growth avenues, such as hospital care solutions or health information systems.

Despite the company’s market position and compelling product line, we remain cautious about future growth, as the company has reached the maturity phase in many of its businesses. Moreover, its future growth seems to be dependent on its ability to position itself in the server, storage and networking business, where the market is rather crowded.

While H-P remains well positioned in some markets, it continues to face stiff competition from other big technology players such as Cisco Systems (CSCO), Apple (AAPL), Acer, Microsoft Corp (MSFT) and Dell Inc. (DELL). Further, the separation of PSG from H-P through a spin-off or other transaction is expected to change the dynamics of the company’s business to a certain extent.

Currently, Hewlett Packard Company has a Zacks #5 Rank, implying a short-term Strong Sell rating, largely because of the uncertainty surrounding its PC business.