In a bid to strengthen its position in Russia,
) is expected to open 10 more offices across the country and the
Commonwealth of Independent States ("CIS"). IBM will open its
branches in the cities of Voronezh, Ufa, Khabarovsk, Tyumen,
Chelyabinsk, Nizhny Novgorod, Samara and Krasnodar in Russia.
Moreover, IBM also plans to open offices in two Ukraine cities,
namely Kharkiv and Donetsk.
IBM has been partnering with various companies in Russia to
modernize its operations in an efficient and cost-effective manner.
IBM has also joined with various businesses to help them in their
expansion strategies. Companies with varied operations, ranging
from engineering to healthcare, financials, retail and education
are IBM's clients. In the current year, IBM intends to partner with
more than 4000 businesses across the stated regions.
To fund its expansion plans, the company expects to invest $6
million through 2012. IBM will also hire local staff to cater
to the growing needs and challenges of its clients in the
The decision to invest its resources in Russia and CIS regions
is supported by the fact that the country's real GDP has increased
by 67% since 2000, according to research and analysis firm
Economist Intelligence Unit, a business unit of The Economist
According to Bloomberg, Russia's economy in the last quarter
grew at the fastest pace since the three months ended September
2011. The growth came on account of robust retail sales that offset
slower production in mining. The Federal Statistics Service in
Moscow noted that Russia's GDP grew 4.9% in the first quarter from
the year-ago period.
Moreover, IT spending in Russia was $32 billion in 2011, which
is expected to rise to $35.5 billion in 2012, according to IDC
estimates. Separately, Gartner expects Russia's share of IT
spending to be approximately 45% of the total spending in Central
and Eastern Europe. The research firm expects IT spending in the
region to touch $158 billion this year. Thus, IBM is well on track
to capture the billion dollar opportunity that the region
IBM has significant exposure to the BRICS (Brazil, Russia,
India, China and South Africa) countries, which contributed 19% of
its revenue in 2011. In the first quarter of 2012, IBM continued to
witness strong growth from BRIC countries (up 10.0%
reportedly/11.0% on a constant currency basis).
Although we remain optimistic about IBM's policy of expanding
its business in Russia and the CIS, we remain concerned about the
current economic pressures in the region.
However, as growth and investment opportunities in the developed
countries slow down in 2012 and beyond (visibility is considerably
murkier), we believe that emerging economies of BRIC, Africa, Latin
America and the Asia-Pacific will play a key role for IBM.
We also believe that IBM's continued focus on global expansion
will provide it a significant competitive edge over its rivals
including U.S. companies such as
) and also over smaller local companies operating in any given
We have a long-term Neutral recommendation on the stock.
Currently, IBM retains a Zacks #3 Rank, which implies a short-term
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