Ameriprise Renews Deal with IBM

In an effort to keep pace with the growing technology standards of the industry, Ameriprise Financial Inc. (AMP - Analyst Report) re-signed a multi-year deal with technology giant International Business Machines Corporation (IBM - Analyst Report). The deal will allow the latter to continue its six-year practice of helping Ameriprise combine different IT systems with diverse financial products and applications. Further, it will considerably improve the core parts of the company's technology infrastructure – midrange, mainframe, storage and network services.

IBM manages the Ameriprise PeopleSoft applications, which include application and infrastructure tiers for its human resource, financial management, supply chain, and customer-relationship management tasks, through the IBM SmartCloud – the cloud computing products and solutions from IBM. Further, the technology giant is responsible for maintaining Ameriprise’s technology infrastructure standards at par or ahead of the rapidly developing industry.

Ameriprise believes that re-inking of the deal will help it realize its increasing information technology and business requirements, since IBM has a strong expertise and world-class service potential. Ameriprise expects IBM’s diversified product and service portfolio to be beneficial to its clients, advisors, employees as well as shareholders.

We believe that Ameriprise’s deal with the technology behemoth will help it continue operating much faster and in an uncomplicated way. The deal is also expected to positively impact the company’s financials by lowering operating expenses, amidst a sluggish macroeconomic environment.

To keep up with the economic instability, many firms are adopting expense management measures. Recently, State Street Corporation (STT - Analyst Report) announced that it is striving hard to timely complete its Information Technology Transformation program by 2014. This program is designed to rationalize the company’s technology infrastructure and generate around $600 million in pre-tax savings by 2015.

Ameriprise retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term ‘Neutral’ recommendation on the stock.