
H-P Heading Towards Growth: Analyst
PALO ALTO, Calif. (
) --
Hewlett-Packard
(HPQ) - Get Report
is gearing up for a
good
2010 thanks to services, storage and networking, according to analyst firm Goldman Sachs.
The tech bellwether, which was one of the
TheStreet's
for 2009, recently posted strong
results, and has
a return to
next year.
Goldman is singing the company's praises after a recent meeting with H-P CEO
.
"There are multiple opportunities over the near and intermediate term to drive revenue growth and margin improvement, which we think will ultimately lead to a series of quarters with earnings upside," wrote analyst David Bailey, in a recent note. "On the top line, HP continues to expand its total available market, with the biggest opportunities coming from services, storage, and networking."
Networking is certainly
in H-P's future after its surprise $2.7 billion
of
3Com
(COMS)
. H-P is on a mission to
challenge
Cisco
(CSCO) - Get Report
after the networking giant entered the server market earlier this year, and 3Com is also expected to open up new revenue in
.
There is a feeling, however, that it could be some time before H-P reaps the benefits of this strategy. Bailey says that the company's storage and networking initiatives may take several quarters to contribute significant revenue, although H-P's services business should fill this vacuum.
"An extremely strong quarter of services signings (many in accounts new to HP), and a building pipeline of new deals, suggest that the growth in HP's services business should pick up in the near term," he wrote. "In services, we think that HP has made significant progress in its outsourcing and maintenance businesses."
The analyst acknowledges, however, that there is still "ample room for improvement" in both H-P's outsourcing and its maintenance businesses. H-P's services revenue increased 8% to $8.9 billion during its recent fourth quarter, although it still lags behind
IBM
(IBM) - Get Report
's quarterly services signings of $11.8 billion.
H-P, which competes with
EMC
(EMC)
and
NetApp
(NTAP) - Get Report
, also has its eye on
, recently
buying
storage software specialist
Ibrix
for an undisclosed fee.
Cloud services, which let users access computer and storage services via the Internet, are becoming increasingly popular, prompting something of an arms race between companies like H-P, IBM and
Oracle
(ORCL) - Get Report
.
H-P also has been attempting to exploit Oracle's purchase of
Sun Microsystems
(JAVA)
, recently
at worried Sun customers.
Within H-P itself, Hurd has focused heavily on
,
in the midst of the recession. Although the CEO has his critics, notably for his
compensation package
, Hurd is still admired on Wall Street and is credited for getting H-P back on track after the departure of his predecessor Carly Fiorina.
"In addition to HP's efforts to improve its operating margin through headcount cuts and mix, the company is also working to standardize its supply chain across product lines and geographies," wrote Bailey, who rates the company a 'Buy'. "We think that earnings upside will serve as a catalyst for multiple expansion."
Even with
weakness
in core businesses, such as its printer division, and the impact of lower-priced PCs, H-P remains something of an analyst darling.
The computer and server maker enjoyed a
slew
of price target and estimates raises following its fourth-quarter results, and the company's stock has risen more than 35% this year.
-- Reported by James Rogers in New York









