In a bid to strengthen its computing services portfolio, IBM Corp. (IBM) has agreed to acquire Platform Computing, a cluster and grid management software development company for distributed computing environments. The financial terms of the deal, which is scheduled to close in the fourth quarter of 2011, were not disclosed.
Based in Toronto, Ontario, Canada, Platform Computing is a privately-held company, with over 2,000 clients that include CERN, Citigroup Inc. (C), Infineon, Pratt & Whitney, Red Bull Racing, Sanger Institute, Statoil and University of Tokyo to name a few. The company helps clients in the integration and management of shared-computing environments to accelerate innovation, business analytics and IT services.
The combination of Platform Computing’s software with IBM’s high performing and industry-tested platforms is expected to generate cost savings for users, while enabling, management and processing of significantly larger amounts of data.
IBM considers this acquisition a strategic move in the smart computing arena, a key initiative in IBM’s Smarter Planet strategy. According to IDC, the opportunity in the servers, storage and systems software segments of technical computing is more than $14 billion in 2011 and it anticipates over 8% growth annually to $18.5 billion by 2014. By 2015, IBM expects the Smarter Planet initiative to generate revenues of $10 billion.
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. It has already supported innumerable organizations with its industry-ready software and hardware solutions. Strategic acquisitions in the field of computing and business analytics are likely to help the company grow in the long term.
With a strong balance sheet and robust cash flow, IBM has the option of looking out for companies with important intellectual property that could help it stay ahead of its peers and drive both the top-line and bottom-line.
We have a long-term Neutral recommendation on IBM and are optimistic about its strong fundamentals and robust growth prospects going forward.
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).
Currently, IBM has a Zacks #3 Rank, which implies a short-term Hold rating.
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