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IBM’s Big Data Moves

Posted on Friday, Mar 22nd 2013

Gartner’s latest estimates on worldwide IT spending peg the market to grow 4.2% this year to $3.7 trillion. Earlier last year, Gartner was anticipating growth of 3.8% for the year 2013. The report estimates that worldwide spending on devices, which includes PCs, tablets, mobile phones, and printers, will rise 6.3% to $666 billion. Enterprise software spending is projected to grow 6.4% during the year to $296 billion as customers invest more in security, storage management, and customer relationship management. Starting in 2014, Gartner expects organizations to increase their big data and information management–related spending.

IBM’s Financials

IBM (Nasdaq:IBM) is counting on the growth of enterprise software, Big Data and cloud computing to drive its own revenue over many years to come. The company saw Q4 revenues fall 1% over the year to $29.30 billion, ahead of the market’s estimate of $29.18 billion. EPS of $5.39 was also ahead of the Street’s expectations of $5.25.

By segment, software revenues were the only set to witness growth. Revenues grew 3.5% over the year to $7.92 billion. Services revenue fell 2.1% over the year $15.00 billion. Revenues from hardware/system & technology segment fell 1% to $5.76 billion and global financing revenues fell 2.4% to $535.0 million.

By region, revenues from the Americas remained flat over the year at $12.5 billion. Asia Pacific markets were the only ones to see growth, with revenues up 4.0% to $7.0 billion. The EMEA region saw revenues fall 5.0% to $9.1 billion. IBM’s focus on emerging markets is yielding good results: Revenues from the growth markets of Brazil, Russia, India and China (BRIC) grew 11% over the year.

For the current year, IBM expects earnings of at least $16.70 per share, ahead of the Street’s projections of $16.64.

IBM’s Market Expansion

IBM is developing its offerings within the high-growth segments of big data, cloud and mobile computing. Recently, they enhanced their mobile device portfolio by offering services that will include security, device management, analytics and application development for their customers. Known as MobileFirst, the new service was released through a tie-up with AT&T. Together, the two will offer the ability to streamline an IT department’s responsibilities for mobile devices that range from management of employees’ mobile devices to the creation of new mobile commerce apps. The comprehensive suite is expected to receive positive traction from the market.

Within cloud and big data analytics, they released products to help maximize the efficiency of digital marketing efforts, especially for small and medium businesses and emerging markets. IBM is offering their business partners access to cloud-based IBM Digital Analytics technology free for one year. The tool helps with big data analytics by identifying buyer behavior and preference patterns, thus improving the marketing strategies deployed by organizations. Counting on the big data trend, IBM pegged revenue target from the segment to $20 billion by the year 2015. IBM expects to see nearly a quarter of their revenues in 2015 to be derived from big data tools.

As part of their cloud initiative, the company is said to be in talks to acquire cloud computing player SoftLayer. Texas-based, privately held SoftLayer has a portfolio of 25,000 small and mid-sized customers. They are the world’s largest privately held website host. SoftLayer’s price tag is estimated at $2 billion, and the company is said to have other suitors as well, including EMC. It is said that SoftLayer had earlier rejected an acquisition offer by AT&T. IBM has remained silent on the transaction.

Meanwhile, IBM closed another acquisition this month by purchasing analytics software provider Star Analytics. The privately held, Redwood City–based Star Analytics provides software that intelligently integrates information for businesses. The software extracts relevant financial data from big data and delivers it into reporting and business intelligence tools that are available both in the cloud and on-premise. The acquisition will help IBM expand their analytics offering. Terms of the deal were not disclosed.

In December 2012, IBM acquired Austin-based StoredIQ, another player in the big data space. StoredIQ’s offerings helped manage data from multiple sources, including PCs, file shares, and old tapes, and analyze them by pulling out relevant information. IBM will also add this acquisition to their big data suite of offerings to deliver a more efficient and economical governance and discovery model for big data.

IBM’s stock is trading near 52-week highs of $215.26 with a market capitalization of $236.57 billion.

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