IBM to Buy Texas Memory Systems

To strengthen its storage capabilities and expand its product portfolio in the solid state device (“SSD”) storage solutions segment, IBM Corp. ( IBM - Analyst Report ) is set to acquire Texas Memory Systems, a privately-held flash memory solutions provider. The financial details of the deal were not disclosed.

Based in Houston, Texas Memory Systems operates globally through a number of resellers, channel partners and industry partners. The company has strategic partnerships with technology bellwethers such as Dell Inc. ( DELL - Analyst Report ) , Cisco Systems Inc. ( CSCO - Analyst Report ) , Microsoft Corp. ( MSFT - Analyst Report ) to name a few. Texas Memory Systems provides its storage solutions into a number of industries that range from financial, high performance computing, telecom, and e-commerce to health care.

IBM has been delivering cost effective, power-efficient enterprise solid-state storage technologies and solutions. The integration of Texas Memory Systems’ offerings will further strengthen IBM’s position in the storage market.

Moreover, according to a research report from IDC, SSD industry’s revenue in 2012 is expected to increase significantly from 2011. This increase will be primarily driven by technology innovations and enhancements and near-term shortages in the hard disk drive (“HDD”) segment.

Moreover, SSD price declines in the second half of 2012 will also help drive revenues. In 2011, revenue from the SSD industry was $5 billion, soaring 105% from 2010. Additionally, IDC estimates global SSD shipments to grow at a 51.5% CAGR from 2010 to 2015.

Though the adoption rate in the SSD has been soft in the near term but is expected to pick up on a longer-term basis because it is more efficient and fast. We believe that IBM is well poised to grab the opportunity in the SSD market with its own product portfolio and through its strategic acquisitions.

IBM intends to spend $20 billion up to 2015 on acquisitions. We expect IBM to continue to acquire companies that are strategically important to achieve its 2015 goals.

We believe that IBM’s strong product pipeline, expansion into emerging markets and continuous acquisitions will help it to achieve long-term growth. However, we remain cautious on the overall IT spending environment and believe macroeconomic concerns will continue to hurt IBM’s growth in the near term. Increasing competition in most of IBM’s markets is an added concern.

Thus, we remain Neutral over the long term. Currently, IBM has a Zacks #3 Rank, which implies a Hold rating in the near term.