IBM Unveils New Cloud Solution

International Business Machines Corp. ( IBM - Analyst Report ) has unveiled its new hybrid cloud solution that is capable of managing and connecting public and private clouds securely for its clients.

Hybrid cloud is a composition of two or more clouds (private, community, or public) that are bound together but have distinctive characteristics, offering the benefits of multiple operation models to its users. Through this new offering from IBM, organizations will now be better equipped to handle the hybrid cloud technology as it will now be significantly easier for them to manage and control their business applications securely.

Globally, almost all businesses are beginning to strategize their operating model in a manner that unforeseen events do not disrupt the steady work flow. Uninterrupted operation ensures no revenue loss for organizations.

IBM has the experience and expertise in managing IT environments of innumerable clients globally and will continue to innovate and revolutionize the client servicing space. IBM’s opportunity pipeline with respect to new technologies, especially those related to cloud computing continues to grow, as clients increasingly go for IT-enabled expansion.

Cloud computing has a number of advantages and the cost advantage of sharing resources has resulted in its growing adoption by businesses across a number of industries. However, proper management and usage of the technology is a prerequisite.

The cloud computing market is expected to grow at a CAGR of 40.0% from 2010 to 2015, crossing $7.0 billion in revenues by 2015. Cloud computing leads to improved services and elevated security requirements for companies that use it and IBM’s product portfolio is well positioned to benefit.

Additionally, according to analysts, 39% of cloud users have adopted the hybrid cloud as a part of their operational strategy, and this number is expected to be in the vicinity of 61% in the near future. This growth is a reflection of the fact that organizations are evolving toward the use of hybrid technology.

IBM remains a heavyweight in the cloud computing market and its strong cash balance enables IBM to acquire companies with high intellectual property (IP), which will drive further growth in upcoming quarters. We have a long-term Neutral recommendation on IBM and are optimistic about its strong fundamentals and robust growth prospects going forward.

We also believe that IBM’s growing initiatives in the smarter planet, business analytics and optimization will drive long-term growth. Besides, the ability to generate strong free cash flow, expand margins and improve the already robust balance sheet make the stock attractive over the long term

However, the competitive landscape includes technology giants, such as Oracle Corp. ( ORCL - Analyst Report ) , Hewlett-Packard Co. ( HPQ - Analyst Report ) , Microsoft Corp ( MSFT - Analyst Report ) and EMC Corp ( EMC - Analyst Report ) , all of which have joined IBM in the cloud computing market.

We currently have a Zacks #3 Rank for IBM, which translates into a short-term Hold rating.