International Business Machines Corp. (IBM) recently announced that it is acquiring analytics company i2. However, terms of the deal were not disclosed.
Cambridge, U.K.-based i2 develops analytical software that prevents crime and fraud in sectors such as banking, defense, health-care and insurance. The company boasts a clientele of more than 4,500 spanning over 150 countries.
Currently, i2 solutions are used by 12 of the top 20 retail banks globally and 8 of the 10 largest companies in the world.
IBM intends to integrate i2’s technology with its analytical solutions, which will help public agencies and private enterprises to detect and prevent security threats by collecting, processing and analyzing data within a very short span of time.
IBM and i2 will provide customers a wide range of analytical tools for timely delivery of intelligence, including threat and fraud analytics. These tools will enable the analysts to accurately identify connections, patterns and trends in complex data sets and easily model data within a very short span of time.
i2 will be integrated into IBM's most profitable segment, Software Group and the company expects to close the acquisition by the end of fourth quarter of 2011.
Analytics is among the four growth initiatives on IBM’s part and the company has been on an acquisition spree over the last few years to expand its analytics portfolio. According to the Wall Street Journal, IBM has spent approximately $14.0 billion in acquiring analytics companies and i2 is the company’s 25th analytics acquisition over the last five years.
In 2010, IBM acquired a number of companies such as Clarity Systems, Open Pages, Coremetrics and most significantly, Netezza, which expanded IBM’s business analytics portfolio.
To expand its market share, IBM has opened a number of analytics data centers across the world, including Zurich, Budapest, Vienna, Berlin, London, Beijing, Tokyo, New York, Dallas and Washington. The global network has more than 6,000 IBM consultants dedicated to data analytics.
These initiatives have enhanced IBM’s business analytics growth in the first half of 2011, as business analytics revenue increased more than 20.0% year over year. IBM expects business analytics to increase to $16 billion by 2015 and to contribute approximately 20.0% growth in the 2011-2015 period.
Our Take
IBM spent $6 billion in acquiring 17 companies in 2010. However, 2011 has been relatively quiet for IBM, with the only notable acquisition being that of real-estate software company, Tririga.
IBM expects to invest $20 billion in acquisitions over the next 5 years. We believe the acquisitions will boost profitability going forward. We also believe acquisitions will provide a competitive edge to IBM over Oracle Corp. (ORCL) in the highly competitive business analytics market.
We maintain a Neutral rating over the long term (6-12 months). Currently, IBM has a Zacks #3 Rating, which implies a Hold rating in the near term.
INTL BUS MACH (IBM): Free Stock Analysis Report
ORACLE CORP (ORCL): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment