IBM to Digitalize Banca Carige & Australian Government
International Business MachinesIBM has collaborated with Banca Carige, an Italian bank, to introduced Dock, a $0.5 billion U.S. joint venture agreement. Based in Genoa, Italy, Banca Carige seeks to enhance financial processes by improving competitiveness across its branches and overall clientele.
IBM's innovative capabilities comprising artificial intelligence ("AI"), big data, cognitive and analytics offerings will assist Banca Carige to digitally transform its processes. The new technologies will eventually aid the Italian banking group achieve the desired business goals. Dock presently employs 173 professionals, comprising 133 people from Banca Carige and the rest from IBM.
Additionally, the tech giant also entered into an AU$1 billion (estimated to be $740 million) deal with the Australian government to become its technology partner. Per the five-year deal, IBM's advanced AI, Internet of Things (IoT), blockchain, cloud, quantum computing and cross-brand capabilities will be leveraged by different Australian Government agencies.
Both the deal wins strengthen the company's growth prospects in the digital transformation space. Per a MarketsandMarkets report, digital transformation market is envisioned to grow at a CAGR of 19.1% to $493.39 billion by 2022 from $205.99 billion in 2017. As a result, IBM seems well-positioned to capitalize on projected growth. The report only reinforces our belief that IBM's services hold immense potential.
We note that IBM's stock has lost 3.6% in the past year, against the industry 's rally of 1.0%.
Partnership with Banca Carige
Notably, the deal was signed in the first quarter of 2018. This partnership will aid in simplifying the bank's IT infrastructure, aid digital transformation processes, consequently enhancing client experience. In fact, Banca Carige aims to bring about a single bank model. Digital banking, cloud storage, cost optimization, leveraging robotics and enhancing financial advisory processes remain other focal points.
According to Enrico Cereda, President and CEO of IBM Italy, "With this new alliance, a path is born that leads the banking sector towards a future full of new professional skills and opportunities offered today by innovation and technological progress." Cereda further added, "Italia is proud to accompany one of the country's oldest financial institutions along the path of digital transformation."
IBM's Deal to Assist Australian Government
Australia aims to provide its citizens with "one of the top-three" digital government infrastructures, by 2025. In a bid to realize this goal, Australian government will leverage both IBM's hardware and software at various levels to optimize their respective processes. Apart from the leading Digital Transformation Agency ("DTA"), other agencies utilizing IBM's solutions will be the Department of Defence ("DOD"), the Department of Home Affairs ("DHA"), to mention a few.
IBM's 'Building Digital Capability' tools and related resources will be made accessible across departments. The focal point is to establish robust security solutions to ensure safety of citizen data from advanced cyber-security threats. Australian government is estimated to save approximately AU$100 million from the deal, which is effective immediately through June 2023.
We believe this is major win for the company given its unpleasant past association with the Australian government. The renewed ties are likely to augur well in the long haul.
IBM has been a pioneer when it comes to helping businesses and governments to digitally transform and evolve. The tech giant continues to bring innovation to services to help the enterprises, government agencies, leverage the emerging technologies, including the likes of cloud, AI, IoT, among others.
IBM's advanced capabilities makes its offerings well poised to gain robust adoption. The traction witnessed by the company's services will bolster the top line.
We believe the ongoing deal wins with its notable customer base will eventually aid IBM in competing against peers.
Zacks Rank & Key Picks
IBM currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector are Seagate STX , Mellanox MLNX and Micron MU , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
The projected long-term earnings growth rate for Western Digital, Mellanox and Micron are 19%, 15% and 8.2%, respectively.
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