Information Technology (IT) giant International Business Machines Corp. (IBM) has opened a new branch office in Dakar, Senegal.
The Dakar office is a part of IBM's West Africa operations and will complement IBM's other West African branch offices in Accra, Ghana and Lagos, Nigeria, which act as business hubs in the region.
The branch office will enable IBM to deliver solutions and services to its growing clientele in Senegal and the West African region. IBM already serves a number of clients in key sectors spanning the telecommunications, oil & gas, finance and government verticals.
Recently, the Customs Directorate of Senegal's Ministry of Finance contracted IBM to help modernize Senegal's import and export processes. IBM and its partner CFAO Technologies is also providing services to the Cameroon’s Ministry of Finance by upgrading and securing the payroll process of government employees in the country.
In Nigeria, IBM is also collaborating with several West African banks to help increase efficiencies and with Bharti Airtel across 16 African countries to develop its telecommunications operations.
The new branch office in Dakar is a part of IBM’s strategy of expanding its footprint in the emerging markets of Asia and Africa. IBM has offices in more than 20 countries in Africa, including South Africa, Morocco, Egypt, Tunisia, Algeria, Ghana, Nigeria, Kenya, and Mauritius.
IBM generates more than 50.0% of its revenue outside the U.S. especially from emerging economies such as South Africa, Malaysia, Poland, Ecuador, Singapore, Peru, Romania, the Czech Republic, the Middle East, Vietnam and Australia, thereby enabling the company to maintain stability in its business despite fluctuating economic conditions in the U.S.
IBM has been gaining a lot of traction in emerging markets, with many government agencies from different countries in the Asia-Pacific and African regions choosing IBM’s services and technical support for their operations, thus ensuring steady flow of orders and market share gains across regions.
IBM’s technology has also been selected by other organizations in emerging markets, including the First National Bank of Namibia, Comepay in Russia, Kazakh Rail, HeiTech Padu in Malaysia, China Internet Network Information Center, Korea's BC Card and Korea's Dongbu Insurance.
The recent government contract wins in Cameroon and Senegal further strengthen IBM’s position in the government vertical.
Moreover, IBM is developing academic relationships with Cheikh Anta Diop University in Dakar and Thies University in Thies, for imparting information technology training to the students in the region.
IBM plans to open 10 new offices in Africa, bringing its total number of offices in the continent to 35 by 2015 as it starts operations in Tanzania and Angola, besides Senegal. By 2015, IBM expects to expand its operations to at least 23 countries across the continent.
IBM has invested approximately $300 million in Africa since 2006 and plans to increase its spending by 47.0% to $12.5 billion by 2015. This will help IBM to tap the growing mobile-banking market in Africa over the long term.
IBM also remains focused on increasing its footprint in the Asia-Pacific region. IBM announced a $38 million investment to build a new IBM Asia-Pacific Cloud Computing Data Center in Singapore to exploit the potential of cloud computing through its comprehensive solutions and services.
The company has 13 global cloud labs, of which seven are based in the Asia-Pacific countries of China, India, Korea, Japan, Hong Kong, Vietnam and Singapore.
IBM also commenced a new Power Systems development laboratory in Taiwan, which is the company’s first research center outside the US.
IBM expects growth markets to drive revenue and increase growth in 2011 and beyond. In 2010, IBM generated 29.0% of its total systems revenues from these markets. The company expects revenue from these markets to grow at least 40% by 2015.
IBM expects growth markets to contribute 30.0% of its total geographic revenue by 2015, up from 21.0% in 2010.
Recommendation
We believe that IBM will continue to benefit from its spate of new initiatives like smarter planet, business analytics and optimization and cloud computing over the long term.
However, IBM continues to face stiff competition from a number of companies, including Hewlett Packard Co. (HPQ), Microsoft Corp. (MSFT), Oracle Corp. (ORCL) and EMC Corp. (EMC).
We remain Neutral over the long term (6-12 months) based on the belief that the company’s shares are fairly valued at current levels.
Currently, IBM has a Zacks #3 Rank, which implies a short-term Hold rating.
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