International Business Machines Corp. (
recently announced that it has entered into a partnership with
Tanzanian Ministry of Communication, Science and Technology, to
accelerate technology adoption in the country. The new partnership
is a part of the government's developmental efforts and strategy to
improve competitive position in East Africa.
The new partnership with the Tanzanian government reflects IBM's
continuing focus on expanding its business in East Africa. Tanzania
holds a key position in the region as its Dar es Salaam port acts
as a trading hub not only for domestic traders but also facilitates
business for the neighboring landlocked countries like Zambia,
Malawi, Burundi, Rwanda, Uganda, and the Democratic Republic of
As per the new agreement, IBM will help Tanzanian government to
improve the IT infrastructure of the Dar es Salaam port in order to
operate more efficiently. This is not only expected to boost
Tanzania's revenue collection processes but also strengthen
regional trade relations going forward. Besides the port, IBM will
help the ministry to develop IT infrastructure across the country
by building data centers as well as providing cyber security
solutions going forward.
Tanzania's strategic position in East Africa has made it an
important market for IBM. To focus on delivering solutions and
services to its growing clientele in East Africa, IBM opened a
branch office at Dar es Salaam in June 2011. IBM collaborated with
Tanzania based National Microfinance Bank (NMB) and transformed its
core banking technology infrastructure in order to support business
growth. Currently, NMB is using IBM's Power servers and storage
technologies to serve a customer base of more than 1.4 million.
IBM is also aiding the Tanzanian government to support the
adoption of information technologies and Tanzania's development in
key areas such as education and research and development. IBM is
also engaged in supporting a number of Universities in Tanzania,
for imparting information technology training to the students in
IBM Continues to Focus on Africa
Over the last couple of years, Africa has emerged as the key
market for IBM, as the company continues to extend its support
toward a number of key sectors (primarily banking and financial
services) across the continent. IT spending in the continent is
expected to grow at a compound annual growth rate (CAGR) of 11.5%
over the next four years. We believe that IBM's initiatives to grow
in Africa positions it well to benefit from the increasing IT
spending in the region.
IBM has a number of agreements (approximately 20) with leading
banks across Africa, which is expected to drive its expansion
policy going forward. Through partnerships with Bharti-Airtel and
Vodafone Group Plc (
, IBM is providing complete assistance to the banks to launch
financial services such as mobile banking and internet banking for
their growing customer base.
Apart from banking and financial services, IBM also serves a
number of clients across telecommunications, oil & gas and
government verticals. Currently, IBM has been chosen by various
government agencies across different African countries to support
their operations, and thus has ensured steady flow of orders and
market share gains across the region.
IBM has invested approximately $300 million in Africa since 2006
and plans to increase its spending in the continent by 47.0% to
$12.5 billion by 2015. To expand its operations and raise demand
for its service and solutions, IBM has also opened more than 20
offices across Africa.
We believe that IBM will continue to open branches in uncharted
areas of the African region, which will enhance its presence in the
key growth market and support its global growth strategy over the
long term. By 2015, IBM expects to expand its operations to at
least 23 countries across the continent.
Despite the socio-political instability and underdeveloped
economic conditions in Africa, we believe that IBM is well
positioned to benefit from the tremendous growth opportunities in
the region over the long term. IBM expects the growth markets to
contribute 30.0% of its total geographic revenue by 2015, up from
21.0% in 2010.
We have a long-term Neutral recommendation on IBM. Currently,
IBM has a Zacks #3 Rank, which translates into a short-term Hold
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