Big Blue Sambas To $220 With New Brazilian Partner EBX

IBM: International Business Machines logo
International Business Machines

IBM (NYSE: IBM) has agreed to buy a 20% stake in SIX Automação, a subsidiary of Brazilian conglomerate EBX that provides technology services to energy, shipbuilding and mining industries. It will also take over technology operations of EBX and has a contract worth $1 billion for 10 years. [1] Brazil’s economy has been growing at the rate of 7-8% over the past few years and IBM hopes to tap into this growth.

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South American Focus Likley To Drive Services

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IBM and SIX Automação will jointly serve customers in Brazil and will actively target other South American countries such as Chile, Colombia and Peru. The near-term focus will be on providing technology solutions to energy, mining and other industries as these economies are still manufacturing and production driven. It will hope to leverage EBX’s significant know-how and clout to get a foothold in the Brazilian technology market.

Services account for just under 25% of our $219 Trefis price estimate for IBM, implying a premium of 10% to the current market price. While the short-term impact of this development is negligible on the stock price, the services business will likely become a key revenue stream in the future.

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  1. Brazil’s Eike Batista signs a deal with IBM, Wallstreet Journal []