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No Back-to-School Blues for HP

As classes begin across the country, No. 1 computer maker HP said it has recently closed a bevy of million-dollar deals with schools and universities

HP bragged the 40 deals, inked with school districts and universities in 22 states and two Canadian provinces, each total over $1 million. Further, the company said two out of three, in the United States, came against bidding from rival computer makers Dell and IBM.

"We're experiencing solid growth in the education market beyond what we projected prior to the merger," Jim Milton, a senior vice president of HP Enterprise Systems Group, said in a statement. "School districts and colleges are looking at HP and obviously liking what they're seeing, turning this into a strong back-to-school season for us."

HP said the contracts include everything from notebook and desktop PCs to printers to wireless local area networks.

With computers increasingly ubiquitous in classrooms, the education market is an attractive target for computer makers, since much of it offers the stability of government financing. IDC estimated that U.S. public schools alone would spend nearly $2.5 billion on computer hardware in the 2005/2006 academic year.

The education industry's splurge on computer equipment could make up for a persistent sluggishness in overall IT spending, particularly spending on computer hardware. After solid double-digit growth during the boom years of 1999 and 2000, spending on computers and peripheral equipment plunged 20 percent in 2001, according to Giga Information Group. The researcher expects spending will continue to fall, albeit only incrementally, before rebounding in 2003.

Gartner Group reported that second-quarter PC shipments dropped slightly to 29.9 million from 30 million shipments in the same period of 2001. The decline was more notable compared to first quarter, when the industry showed signs of recovery with tk million shipments.

According to a recent research report by Deutsche Bank analysts George Elling and Steven Grossblatt, PC sales are unlikely to increase greatly in the second half of the year, as the key enterprise market remains cautious with its IT budgets.

On top of a stagnant PC market, HP is dealing with fierce competition from Dell, which continues to steal overall market share and threaten HP's industry leadership. Based on the second quarter, HP remained the top PC maker, but its market share dropped to 15.5 percent from 18.3 percent in 2001. Dell's market share climbed to 14.9 percent from 13.1 percent over the same period.