) continues to expand in the cloud and recently announced an
investment of $8.0 million for a new data center in Barcelona,
Spain. The new data center is located in the same facility as the
la Caixa data processing center, which is also managed by IBM.
The data center is IBM's first in Spain and 26th all over the
world. The state-of-the-art facility will provide advanced cloud
computing services to IBM customers all over the world. Most
recently, the company invested $17.0 million to open a second
data center in Colombia.
The new center will help IBM to win customers in the region. IBM
has already entered into a contract with Generalitat of Cataluna
to manage one of its four data centers, which will move to the
new facility. Moreover, the new data center will improve data
processing services among la Caixa and IBM over the long term.
In Apr 2013, IBM opened a SmartCloud for Social Business Data
Center in Germany, which will serve the needs of customers in
Europe, the Middle East, and Africa. IBM's new data center in
Spain will further boost its penetration in the European cloud
computing infrastructure services market going forward.
According to IDC, worldwide spending on public IT cloud services
is expected to reach $100 billion in 2016, growing at a compound
annual growth rate (CAGR) of 26.4% during 2012-2016. This is
approximately five times the overall growth rate of the IT
industry as organizations are increasingly taking to the cloud
services model for IT consumption.
Data centers form the backbone of IBM's business and the
company's continuing investment reflects its commitment on
developing the technology. Cloud computing, being one of the four
pillars of IBM's growth plan, is expected to contribute revenues
of $7.0 billion by the end of 2015. IBM's cloud computing
revenues surged 80% in 2012.
Additionally, the acquisition of SoftLayer Technologies will help
IBM to compete with the likes of Amazon web services to win
enterprise-level cloud computing customers. We also believe that
IBM will continue to benefit from its other initiatives like
smarter planet, business analytics and optimization over the long
However, stiff competition from a number of companies, including
Hewlett Packard Co.
) coupled with sluggish IT spending are the major headwinds in
the near term.
Currently, IBM has a Zacks Rank #3 (Hold).
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