AutoTrader.com, a consumer information website and one-stop shop for new and pre-owned cars, has opted for International Business Machines Corp.’s (IBM) Smarter Commerce, which help companies to buy, promote, sell and service their products and services through new business processes by taking customers’ considerations into account.
AutoTrader expects the service to enhance the ordering process through its Electronic Sales Order (ESO) system. The latter will be using IBM’s technology in its effort to provide its dealer and manufacturer customers a simple and hassle-free ordering process.
AutoTrader expects that the Smarter Commerce initiative would simplify the endorsement and sale of cars, thereby speeding up the entire process. The organization is already using IBM’s Sterling Commerce Configure, Price, Quote software for configuring and registering online orders for cars.
IBM has invested $2.5 billion on the acquisitions of Coremetrics and Sterling Commerce in August and Unica in October 2010 to develop the Smarter Commerce initiative.
IBM expects that the market for Smarter Commerce would be worth $20 billion by 2015 and this is the potential that IBM is looking to tap.
Our Take
We believe that IBM’s growing initiatives in the smarter planet, business analytics and optimization segments will drive long-term growth. The ability to generate strong free cash flow, expand margins and improve the already robust balance sheet make the stock attractive over the long term.
IBM remains a heavyweight in the cloud computing market and its strong cash balance enables IBM to acquire companies with high intellectual property (IP), which will drive further growth in the upcoming quarters.
IBM is experiencing strong revenue growth across all geographical regions, coupled with robust growth in emerging markets worldwide. IBM expects these growing markets to drive revenues and increase growth in 2011 and beyond.
However, the competitive landscape includes technology giants, such as Oracle Corp. (ORCL), Hewlett-Packard Co. (HPQ), Microsoft Corp. (MSFT) and EMC Corp. (EMC).
We have a long-term Neutral recommendation on IBM and are optimistic about its strong fundamentals and robust growth prospects going forward. We currently have a Zacks #2 Rank for IBM, which translates into a short-term Buy rating.
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