Buffett’s Stake, Smarter Commerce Deal Lift IBM’s Outlook
This morning the Wall Street Journal reported that the Oracle of Omaha has plopped down a $10.7 billion in IBM (NYSE:IBM) over the last two quarters saying he was ‘hit between the eyes’ while reading the financials. He added that IBM’s value is something he should have noticed years ago. In particular he pointed out that firms are unlikely to switch their IT systems giving IBM good visibility (something he loves) in its enterprise business. Last week, IBM signed a major agreement with China’s Suning Appliance Co Ltd, the largest electronic retailer in China, to help it build a multi-billion e-commerce platform. [1] We believe that these developments are positive for Big Blue in the near term as it faces a stiff competition from Oracle (NASDAQ:ORCL), Microsoft (NASDAQ:MSFT) and Hewlett-Packard (NYSE:HPQ).
We currently have a $187 Trefis price estimate for IBM, in line with the market estimates.
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Smarter Commerce Deals to Boost Big Blue’s Middleware and Business Analytics Offerings
IBM, which earlier this year launched smarter commerce solutions to help clients use advanced analytics to gain valuable customer insights and improve sales and services, will help Suning Appliance build a global e-commerce center in Nanjing and will also help expand it to hire around 715,000 employees in three to five years.
In another press release last week, IBM announced that New Pig Corporation, a leading manufacturer of absorbents for leak and spill cleanup products, has deployed IBM software to transform its e-commerce system. [2]
Potential Upside to IBM in Sight?
IBM has now identified Smarter Planet initiatives as its strategic focus for quite some time and the firm is witnessing a definite rise in adoption of its various ‘smart’ solutions across industries. Since most of these ‘smart’ solutions are based around IBM’s middleware software offerings and utilize the firm’s business analytics solutions, which together make up about 45% of our $187 Trefis price estimate for IBM, the new deal wins could mean a healthy top line growth for IBM in the coming quarters.
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