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Acquisitions continue to be a key growth strategy for International Business Machines (IBM - Analyst Report)). The company recently announced the acquisition of Israeli cyber security solutions provider Trusteer. IBM is expected to shell out something in the range of $700.0 million to $1.0 billion for the privately-held company.

Trusteer helps organizations to fight off financial frauds and other cyber attacks. The takeover is expected to strengthen the technical capability of IBM’s security lab, which is mainly focused on developing solutions that enhances mobile and application security, helps in effectively countering fraud and detects malware.

IBM has been trying hard to strengthen its presence in this segment and has signed dozens of deals in this sector over the last few years. The latest addition was Q1 Labs in late 2011, which helped IBM to form a new security systems division. We believe that the addition of Trusteer will expand IBM security portfolio and market share, going forward.

Trusteer’s cloud-base solutions will primarily help IBM to improve its offerings in segments such as fraud protection, advanced persistent threat protection, zero-day vulnerabilities, endpoint security as well as threat intelligence services. We believe that the improved product portfolio will help IBM to win more U.S. Federal government deals, which has been a major source of revenues for the company over the years.

IBM recently won a cloud-computing contract from the U.S. Department of the Interior to improve the government’s IT infrastructure using its Smart Cloud technology. The deal made a meaningful contribution of $1.0 billion to IBM’s kitty and countered the loss of the $600.0 million CIA contract. 

Lately, cyber security has been a growing threat for organizations of all size. The recent data leakage from the National Security Agency has raised several questions over the competency of the government’s cloud storage systems.

As per a recent report published by global defense website “www.defencetalk.com”, the cyber security market is expected to grow to $93.6 billion from 2013 to 2023 irrespective of budget cuts and European slowdown. Europe is projected to be the second-largest spender with $24.7 billion.

We believe that this huge surge in defense spending provides significant growth opportunities for cyber security solution providers such as IBM. We believe that IBM will continue to pursue strategic acquisitions in this sector to boost its product portfolio, going forward.

However, IBM is expected to face tough competition from the likes of Symantec Corporation (SYMC - Analyst Report), Kaspersky, EMC Corp (EMC - Analyst Report) and Intel Corp. (INTC - Analyst Report) in the near term.

Currently, IBM carries a Zacks Rank #3 (Hold).

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