Update: Amazon Drops Sun, Compaq For HP

Hewlett-Packard struck Internet gold today with the announcement that Amazon.com plans to devote 90% of its IT budget for the next 18 months to HP products and services. HP also says it will become an anchor tenant in Amazon's electronics store, offering an expanded selection of HP printers and handhelds.

The product-and-service deal "is a big coup for HP because it represents the most-visible and highest-volume [business-to-consumer] sites," says David Alschuler, an analyst with Aberdeen Group. "It provides significant credibility for HP in terms of scalability and availability." To date, Amazon has depended on Sun Microsystems and Compaq computers and services.

HP will supply servers and storage for the Web site, distribution and supply-chain management processes, and training and support services. HP printers and computers will also be deployed at Amazon workstations.

Both companies refused to disclose the financial details of the agreement, but Dataquest analyst Eric Rocco says he believes HP gave Amazon.com discounted prices. This is part of HP president and CEO Carly Fiorina's "goal to reinvent HP for the Internet economy, and, symbolically, Amazon is the ideal place to start," Rocco says. The deal makes Amazon one of HP's top five customers.

As to why Amazon chose HP, a laggard in the E-business race, the company will only say it thinks HP offers value and services that will benefit Amazon customers.

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