Analytics has emerged as the new focal point for
) in 2012.The company looks set to drive significant growth in this
fast-growing sector, according to CEO Virginia Rometty.
The strong growth of analytics can be attributed to the
increasing complexity enterprises are facing in the decision making
process. According to market research firm Gartner, analytics is
expected to be one of the topmost strategic technologies for
The research firm believes that the scope of analytics will
expand manifold over the next few years, and will be a must for
enterprises. We believe that IBM remains well positioned to grab
this opportunity going forward.
Business analytics is one of the four key long-term growth
initiatives of IBM, in addition to cloud computing, smarter planet
and growth markets. IBM expects business analytics to grow to a
$16.0 billion business by 2015. The company expects the initiative
to contribute approximately 20.0% of IBM's growth by 2015.
IBM expects to achieve this strong growth based on accretive
acquisitions. Since 2005, the company has invested $14.0 billion in
acquiring 25 companies. To date, IBM has engaged more than 10,000
technical professionals and 7,500 consultants in its analytics
operations. IBM has eight analytics solutions centers across the
world and has more than 100 analytics-based research assets.
We also believe that the gradual shift of analytics to the cloud
will increase the adoption of analytics among large enterprises
going forward. With this shift, analytics will be able to exploit
cloud resources for high performance and grid computing, thereby
reducing cost and time in effective decision making process. We
believe that IBM's product portfolio is well positioned to benefit
from this shift going forward.
We believe that IBM's focus on cloud computing will also boost
its growth over the long term. The cloud computing market is
expected to grow at a CAGR of 40.0% from 2010 to 2015, crossing
$7.0 billion in revenues by 2015. Here also, the company expects to
drive growth through acquisitions.
IBM's strong cash balance enables it to acquire companies with
high intellectual property (
), which will drive further growth in the upcoming quarters. With
$20 billion to spend until 2015 on acquisitions, we expect IBM to
remain an aggressive acquirer of companies, which it deems
necessary to achieve its 2015 goals.
We have a long-term Neutral recommendation on IBM and are
optimistic about its strong fundamentals and robust growth
prospects going forward.
However, the competitive landscape includes technology giants,
), all of which have joined IBM in the cloud computing and
analytics market. Moreover, we expect that a sluggish IT spending
in 2012 will also remain an overhang on the stock going
We currently have a Zacks #3 Rank for IBM, which translates into
a short-term Hold rating.
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