September 3, 2002 9:00 PM PDT

HP seeks gold star in education market

After years of being an underachiever in the education market, Hewlett-Packard plans to announce Wednesday that it has won $100 million in deals in recent weeks.

Individually, many of the deals are fairly small, but HP says that cumulatively they demonstrate the company is set to become a strong player in the education market thanks to its acquisition of Compaq Computer. HP hasn't historically had a large slice of the elementary and secondary schools market. Compaq, though, had been the No. 3 PC vendor in that area, behind Dell Computer and Apple Computer.

The combined HP-Compaq saw double-digit growth in education sales last quarter compared with the sum of both companies' results in the preceding year, said HP Senior Vice President Jim Milton. Together, the two companies had about $1.6 billion in annual revenue from schools and universities prior to the merger. Milton didn't provide a figure for last quarter.

The new deals comprise more than 40 separate wins and run the gamut from wireless notebooks to service contracts. In two-thirds of the deals, the company was competing with bidders that included rivals such as Dell and IBM, Milton said.

HP is seeing an increasing number of school districts that are looking to outsource some of the tasks associated with maintaining their PCs, Milton said.

At least half of all schools are now outsourcing some part of their technology effort because of the costs associated with running and staffing IT departments, said Jeanne Hayes, president of Quality Education Data, a market research firm owned by Scholastic.

"They can't compete with the salaries in the industry," Hayes said.

In a deal with the Katy (Texas) Independent School District, for instance, HP will provide more than $3 million in equipment to the district and be paid $1.5 million a year to help design, administer and support the district's technology plan.

The Katy deal is based on an arrangement that premerger Compaq struck with the school district in Richardson, Texas. In addition to the deals being announced Wednesday, HP also recently inked a $75 million deal with a large school district, a contract that has a significant services component, Milton said. He did not name the district.

At the same time, wireless notebooks continue to be a major focus for school districts. Laptops were a key component for HP in wins in Houston County, Ga., Alexandria, Va., and the Rose-Hulman Institute of Technology in Indiana.

Meanwhile, Maine's governor has planned a press event for Thursday to tout the state's technology plan, which includes distributing about 18,000 Apple iBook notebooks--one for each of the state's seventh-grade students and teachers. Wireless networks have already been set up in 239 of Maine's schools.

Apple remains the leader in terms of PCs installed at schools, according to a QED survey from last year. However, nearly three-quarters of purchases in the past school year were estimated to be for Windows-based machines, according to the same survey.

Focusing on outsourcing could help HP get a larger share of the education market, Hayes said.

"That may be where HP finds the real opening," Hayes said. "That's clearly where the market is going."

 

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