H-P, P&G Cut a Deal

Zacks

Hewlett-Packard Company’s (HPQ) long-standing ties with the gigantic FMCG (fast moving consumer goods) dealer Procter & Gamble Co. (PG) were further strengthened with the latest information technology (IT) service deal between the two. Yesterday, H-P announced that it will be extending its application service support to help P&G manage supply chain operations efficiently. The financial details of the multi-year deal were kept confidential.

Per the deal, H-P will offer its Applications Development Services and Applications Management Services. These solutions will support P&G’s mission critical business applications, which help the company in research and development, inventory management, enterprise resource planning and business intelligence.

With H-P’s application services, P&G can access its various databases on consumer preferences, suppliers, retailers and distributors. This will help the company to formulate more effective product plans and refine its go-to-market strategy.

In June, P&G leveraged H-P’s 3PAR storage, networking, cloud and converged infrastructure solutions to convert its private cloud to a hybrid cloud, which will allow greater flexibility to cope with changing market dynamics.

The back-to-back deals prove the efficacy of H-P’s services and offerings, which enable P&G to provide constant and uninterrupted IT services. It lends the FMCG giant greater flexibility to cope with changing market dynamics and thus keeps it ahead of its peers.

H-P has been dealing with the consumer goods industry for years. No doubt the tech behemoth has gained extensive experience in market dynamics, which has benefited its sizeable customer base time after time. Rapid product innovation, a good understanding of changing demands, supply chain optimization, customer satisfaction and efficient customer feedback are critical to survival in the fast changing consumer goods market.

H-P’s technological innovations have given it the expertise to take care of these key issues. Close association with P&G could act as a catalyst to attract more deals from the sector.

Despite consistent wins and new product launches, we have a bearish view on H-P due to weak fundamentals as a result of lackluster PC, Printer and Services demand.

The lack of positive catalysts resulted in significant downward estimate revisions, on the basis of which H-P has a Zacks #5 Rank, implying a short-term Strong Sell rating.

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