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HP lands deal with IRS

Hewlett-Packard plans to announce Tuesday that it has won a deal potentially worth more than $100 million to supply desktop and notebook PCs to the Internal Revenue Service.

Hewlett-Packard plans to announce Tuesday that it has won a deal potentially worth more than $100 million to supply desktop and notebook PCs to the Internal Revenue Service.

The agreement is a follow-on to an earlier $35 million deal to provide the tax man with new computers. As in the previous agreement, HP is working with PlanetGov, a reseller that specializes in government contracts.

"This is a much larger, three-year deal that could be (greater) than $100 million in scope," HP Senior Vice President Jim Milton said in an interview.

The company anticipates that it will supply the IRS with more than 30,000 Compaq Evo desktop and notebook PCs and monitors each year as part of the three-year deal. However, because much of the federal budget is allocated each year, the actual number of systems shipped could vary, Milton said.

Government sales have been a bright spot amid slow corporate spending. Milton said the government sector is still growing in the double digits for HP, with U.S. government business accounting for $5 billion in annual sales. More than $2 billion of that is in sales to the federal government. The public sector is now HP's largest single market, ahead of sales to other key segments such as the telecommunications and financial services industry.

In the past, though, HP has gotten more of its government business from servers, storage and services, with the company faring less well in the more price-competitive PC deals. Now, he said, it often comes down to HP and Dell Computer on desktop and laptop deals.

While it is too early to declare victory following HP's acquisition of Compaq Computer six months ago, Milton said, much of the merger-related work is done, such as integrating the company's sales force and developing a unified method for paying sales commissions.

Dell, for its part, says it has gotten its fair share of recent deals with government agencies.

A Dell representative noted that the direct PC seller has won a number of government contracts of late, including two deals with the Marine Corps.

In May, Dell inked a deal to provide 10,000 notebooks to the Marines in a deal estimated at $17.7 million. In October, Dell announced an expanded agreement that calls for the service to replace more than 60,000 PCs with Dell desktops and notebooks. Dell is also providing computers to new recruits at the U.S. Military Academy, under a pact announced in September.