IBM Signs Indian Outsourcing Deal

International Business Machines (IBM) announced the signing of a 10-year outsourcing deal with Digicable, a leading cable and broadband distribution player in India. The deal is worth $83 million.

Under the outsourcing agreement, IBM will support the integration of Digicable's digital media content delivery and value-added service applications such as video-on-demand (VOD), interactive TV and Internet services on TV with its core business technologies and processes. IBM will also provide IT infrastructure services, network support, application maintenance services and security services.

Digicable has more than 8 million subscribers in 70 cities of India. IBM will allow Digicable to manage its business processes better and help enhance revenue per subscriber by facilitating the launch of value-added services such as VOD, Push-VOD, Interactive TV, Internet Service on TV, gaming and telephony.

IBM has a strong track record in the media and entertainment space, and management expects significant growth via increased deals in the sector. IBM has annual revenue of $2 billion globally from the media and entertainment industry. The company also has a number of outsourcing contracts with other Indian media companies, such as Sun TV and Tata Sky.

We are impressed by IBM’s continued focus on getting various outsourcing deals, and this deal will open up new revenue opportunities for IBM in the growing media space.

We maintain our Neutral rating on the stock.

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