IBM Continues To Push Growth Through Acquisitions

Nov.11.13 | About: International Business (IBM)

According to IDC's United States Black Book 4Q12 report, total enterprise spending on hardware, software, and IT services is projected to grow 6% this year to $474 billion. The researcher believes that growth is impacted by continuing economic concerns across the globe. Analysts believe that most IT budgets will be focused on big data and analytics, cloud computing, and mobility.

IBM's Financials

IBM's (Nasdaq:IBM) revenues dropped 4% over the year to $23.7 billion, falling short of the market's expectations of $24.89 billion. This was the sixth straight quarter of declining revenues. EPS of $3.99, however, managed to surpass market expectations of $3.96.

By segment, revenues for software grew 1% over the year to $5.8 billion. Systems and technology revenues fell 17% to $3.2 billion, and revenues from IT services fell 4% to $9.5 billion. IBM has seen strong growth in its cloud segment, with revenues up more than 70% this year. IBM does not disclose a detailed revenue breakup, but the company did mention that cloud revenues were more than $1 billion this quarter, with $460 million as cloud service. IBM expects cloud services and products to generate more than $7 billion in revenues by 2015.

IBM expects to end the year with EPS of at least $16.90 compared with the Street's projections of EPS of $16.87.

IBM's Acquisitions

IBM has been focusing on growth through acquisitions. The company expects to continue to spend big on acquisitions, especially in the field of cloud computing and big data market. As such, it acquired a privately owned provider of security software, Trusteer. Through the acquisition, IBM will be able to extend its data security capabilities into the cloud. It plans to create a cyber security software lab in Israel to integrate Trusteer with its own researchers and developers. The lab will focus on products geared toward mobile and application security, advanced threat protection, malware, counter-fraud, and financial crimes. Terms of the deal were not disclosed.

Last quarter, IBM also acquired document and image viewing solutions provider, Daeja Image Systems Ltd. The privately held U.K.-based player provides solutions for enterprise content management. Daeja has more than 4,000 customers worldwide who use its solutions to access large documents and images. IBM plans to use the acquisition to provide customers with instant access to content anytime, anywhere. IBM is already a leader in the enterprise content management market.

To strengthen its mobile initiatives, IBM acquired Dublin-based private player, Now Factory. Now Factory creates software that helps analyze wireless network use. IBM plans to integrate the acquisition with its MobileFirst Analytics portfolio, which helps analyze business data and optimize online customer experience. Within mobile, it also acquired Xtify, a mobile messaging tool provider that enables push notifications to reach customers. Xtify's platform enables organizations to launch targeted marketing campaigns that deliver scheduled, customized messages based on time zones, frequency of delivery required, and other factors. The acquisition should help IBM establish a stronger presence in mobile marketing.

IBM's stock is trading at $179.99 with a market capitalization of $195.44 billion. It touched a 52-week high of $215.90 in March 2013.