Perspecta prepares to move beyond NGEN loss

2020 will be critical as Perspecta attempts to make up for its NGEN-R bid loss, with federal spending priorities providing an avenue for growth

“Perspecta delivered steady top-line results in 4Q19 as it posted a very strong book-to-bill ratio (1.4) and continues to win new deals in areas of strategic importance for both Perspecta and the federal government, such as cybersecurity, enterprise IT and radio frequency technology,” said Research Analyst Brian Baker. “The federal budget continues to be extremely growth-friendly for IT vendors, especially in areas like IT modernization, cybersecurity and commercial off-the-shelf solutions.”

He continued, “Perspecta’s growth outlook is clouded significantly by the NGEN-R bid loss, but the effects of this loss are not likely to impact Perspecta’s top line much more in 2020 as the company is already executing on an extension of its existing NGEN contract, which will last until at least September 2020. The NGEN-R bid loss comes at a relatively ideal time for Perspecta, as only 8% of its book of business is up for recompete in the coming year, allowing significant opportunity to pursue new business. If business development efforts are successful, Perspecta may be able to mitigate a good portion of the NGEN loss, but TBR believes growth in 2021 will remain a significant hurdle for the company.”

Additional reports recently published by TBR’s analyst teams

4Q19 Google Cloud: Acquiring, partnering and innovating in triple-play strategy

“In 4Q19 Google Cloud saw rapid revenue growth that paralleled and validated its continued and planned investments in infrastructure, R&D, talent, partnerships and global expansion. TBR predicts this accelerated pace of growth, fueled by offerings like Google Cloud Platform, will help the company close the gap with market share leaders Amazon Web Services and Microsoft.” — Nicole Catchpole, Senior Analyst

4Q19 Hewlett Packard Enterprise Initial Response

“According to the original timeline, HPE Next was supposed to be nearing completion, but in 4Q19 HPE announced the HPE Next initiative will continue through the end of HPE’s fiscal 2021. The vendor promises ‘incremental savings’ from this move, but TBR believes the extension is likely to involve further restructuring and potential employee rationalization as HPE eliminates redundancies from acquisitions such as Cray.” — Stephanie Long, Senior Analyst

4Q19 Cisco Systems: Facing lower demand as macro headwinds mount

“Enterprises and SMBs embraced Cisco’s intent-based networking offerings for most of 2019, while communication service providers (CSPs) redistributed capex toward RAN for 5G and virtualized infrastructure rather than core network initiatives. In 2020 we expect Cisco CSP revenue to continue to shrink, though at a slower rate due to rising spend on 5G core networks. Enterprise spending will decline as well due to macroeconomic factors such as COVID-19-related capex delays.” — Michael Soper, Senior Analyst

4Q19 Cisco Customer Experience: Enhance core capabilities to drive client value

“Software- and subscription-based engagements provide consistent support and maintenance revenue, and emerging solutions that embrace AI, IoT, security and cognitive capabilities provide opportunities for Cisco Customer Experience to bolster performance through upselling. Additionally, Cisco’s expanded footprint helps foster client relationships and showcase its expertise, leading to higher-value transformation engagements. We expect Cisco will continue to lead with its deep domain expertise, particularly in cybersecurity, to create new opportunities within its existing client base as well as strengthen its share in underpenetrated markets including APJC.” — Kelly Lesiczka, Analyst

4Q19 Hewlett Packard Enterprise Cloud Initial Response

“HPE recently began reporting annualized revenue run rates (ARR), as it looks to transition its entire portfolio toward consumption-based pricing by CY2022. HPE’s ARR grew 19% year-to-year in 4Q19 to $511 million, driven largely by GreenLake revenues, but high-growth, software-defined platforms such as Aruba Central and the newly launched HPE Container Platform will become rising contributors. At its Security Analyst Meeting in October, HPE provided guidance of a 30% to 40% CAGR in ARR between FY2019 and FY2022. TBR expects the transition to favorably benefit margins during this time period, but it will likely take time for HPE’s top line to reflect the change.” — Catie Merrill, Analyst

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