International Business Machines
) has launched a new global initiative to tap into a rapidly
growing "third platform", which consists of cloud services, mobile
computing and big data analytics. IBM made this announcement at
its PartnerWorld Leadership Conference 2013.
IBM's focus on cloud computing and analytics is already paying
off as these divisions have seen high revenue growth in recent
quarters. We expect these units will continue to drive growth in
2013, and IBM's focus on launching services based on this third
platform will aid growth. According to IDC, worldwide IT spend will
reach around $2.1 trilion in 2013, a y-o-y increase of over 5.7%.
IDC has predicted that the primary driver for this spending would
be the double-digit growth across third platform constituents.
Emerging markets, expected to grow by 8.8% to exceed $730 billion
in 2013, will further fuel IT spend. In its 2015 road map, IBM has
stated these as the key factors in the overall growth strategy for
See our full analysis on IBM
New intiatives to improve IBM profitability
IBM, in its 2015 road map, has stated that third platform
services and emerging markets will be key drivers for revenue
growth. IDC's prediction for emerging markets growth represents 34%
of the expected IT worldwide spending in 2013, and more
significantly, it represents 51% of all new growth in the IT. IDC
has also projected mobile devices to grow by 20% to reach
$413 billion in 2013, 57% of all IT market growth. Cloud computing
has popularized Software as a Service (SaaS) and Platform as a
Service (PaaS) and continues to complement existing IT solutions in
IBM has supplemented its product portfolio on the third
platform. Some of the recent launches are as follows:
- IBM doc to recapture the lost Lotus notes share in a $7
billion enterprise e-mail market.
- SmartCloud storage that will interact with Tivoli Storage
Productivity Center in the background.
- IBM Digital Analytics Technology, cloud-based and helps
analyze big data to identify patterns in customer behavior.
- MobileFirst, a mobile solution that combines big-data
analytics and cloud computing that will transform the business
in emerging markets where poor infrastructure hinders
Some of these new initiatives have started reaping
benefits already. For 2012, business analytics revenue grew 13%
while Smarter Planet revenue was up more than 25% and cloud revenue
jumped nearly 80%. These high growth and high margin businesses
explain the jump in IBM's EPS despite lower y-o-y revenues.
Revenues in the BRIC countries - Brazil, Russia, India and China -
Going forward, IBM can leverage its new initiatives to
increase its revenues across different divisions. Currently,
storage services account for $3.6 billion of IBM's revenue. With
the new launch, SmartCloud Storage, IBM offering in its storage
services to IT and non-IT departments has surpassed conventional
storage services. Moreover, cloud storage is a
cost effective solution for
the emerging market.
Storage services to emerging markets are expected to
see good growth in the coming year and will help IBM in stemming a
decline in the division revenue. With the launch of big data
analytics over cloud, IBM stands to grow its revenue in Global
Business Services. GBS reported $18.6 billion in revenues for
2012. This segment contributes 17% to the top line of IBM and
has seen growth in the previous fiscal year.
With new launches and initiatives, IBM can generate new
revenue stream with new buyers such as the CFO, CMO. This will give
a boost to GBS, and we expect that its contribution to the top line
will increase gradually over the next seven years. The
new initiatives on the third platform such as MobileFirst
also supplement Middleware software business in device management,
analytics and application development. Many of
these services can be offered as SaaS or PaaS
over cloud. We expect that the new initiatives in mobile
computing will aid IBM in recouping the flagging revenue in
middle-ware software division and increase sales through the
integration of various offerings.
We currently have a
$215 Trefis price estimate for IBM
, which is about 5% higher than the current market price.
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