What Do IBM’s Acquisitions over The Past Six Months Indicate?

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IBM: International Business Machines logo
IBM
International Business Machines

International Business Machines (NYSE:IBM) has acquired nine companies in the last six months. The acquisitions indicate that the company is focused on rebuilding its business around digital marketing, Software as a Service (SaaS) verticals and business intelligence verticals. The table below lists the recent acquisitions:

IBM Acquistions 20162

Why IBM acquired companies in digital marketing vertical:

  • With the advent of the internet, the share of online ads in the global ads industry in increasing.
  • According to PWC, global internet advertising revenue will surpass TV advertising in 2016.
  • By 2020, internet advertising revenue will grow at an 11.1% CAGR to reach US$260.4 billion.
  • IBM plans to establish and improve its portfolio of services for digital marketers through the assimilation of these services into its IBM Interactive Experience (IBM iX) and leverage Watson Business intelligent tool to deliver powerful insights into consumer behavior.
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Why IBM acquired companies in SaaS vertical:

  • Enterprise SaaS is growing at a fast pace and grew by almost 40% in 2015, according to Synergy research.
  • Enterprise SaaS will triple in size over the next five years.
  • While IBM’s SaaS revenue is growing faster than the industry, it still accounts for less than 8% of its overall revenue
  • The company acquired Optivia and Blue Wolf Group LLC to bolster its SaaS revenue and compete with industry leaders, i.e., Salesforce and Microsoft.

Why IBM acquired companies in the security domain:

  • IBM is a leader in the security domain and reported revenue of over $2 billion in 2015.
  • It continues to add employees and capabilities to its services in order to stay ahead of the competition
  • The acquisitions of Iris Analytics and Resilient Systems will help the company to bolster its fraud detection and incident reporting platform.

Why IBM acquired Truven Health Analytics:

  • IBM launched Watson Health in April of 2015 and has spent $4 billion to acquire Truven as well as Explorys, Phytel, Merge Health.
  • The company has yet to size this promising business, though it has more than 5,000 employees.  And it is subsumed with IBM’s Watson cognitive computing business, which has revenues that we estimate to be about $1 billion and serves other vertical segments as well. IBM’s Analytics business, in turn, generates revenues in excess of $17 billion.
  • With this acquisition complete, IBM’s health cloud houses one of the world’s largest and most diverse collections of health-related data.
  • It can funnel disparate data sets from Truven health into Watson to create unique insights that can improve the quality of care at lower cost.

Have more questions about IBM? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for IBM.