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IBM Teams Up With AMD to Enhance AI and Security Solutions

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International Business Machines Corporation (IBM - Free Report) and Advanced Micro Devices (AMD - Free Report) have collaborated to improve artificial intelligence (AI) and cybersecurity solutions for both the companies.

Citing data from IBM’s Institute for Business Value, the companies stated that cybersecurity is main consideration for business enterprises while migrating to hybrid cloud as well as choosing a cloud provider.

Further, citing a Gartner report as revealed in the press release, the companies noted that confidential computing extensively mitigates the threat of cybersecurity attacks. As a result, it can potentially help in improving hybrid cloud adoption by business enterprises.

Confidential computing refers to protection of data, while being processed in a hardware-centered execution environment.

IBM and AMD will jointly create open-source software along with open system architectures to facilitate confidential computing over hybrid cloud to alleviate the security concerns of enterprises.

The creation of open source software and system architecture will also support encryption capabilities and virtualization. It will also enable deployment of accelerators across high-performance computing.

Notably, shares of IBM have lost 12.6% in the year-to-date period compared with the industry’s decline of 15.7%.

Abundant Market Prospects

Escalating risk of sophisticated cyber-attacks is boosting demand for robust security offerings. Moreover, the growing need for effective, cloud-capable and secure data storage solutions adds to this demand.

Per a Verified Market Research Report, the cloud security market is expected to grow to $37.69 billion globally at an estimated CAGR of 25.9% between 2020 and 2027. Further, AI in cybersecurity is projected to reach $40.61 million by 2026 at a CAGR of 30.12% between 2019 and 2026, per another Verified Market Research Report.

Enterprises across the globe are rapidly migrating to hybrid cloud, and this augurs well for IBM. Further, providing clients with enhanced security offerings infused with latest technologies is expected to result in higher uptake of the company’s hybrid cloud services.

IBM has been focusing on growing its cloud business. The company considers hybrid cloud as a massive revenue growth opportunity.

To capitalize on this, IBM recently announced the split of its business into two units in a bid to speed up its hybrid cloud growth initiative. IBM will spin off its legacy Managed Infrastructure Services business into a new company by the end of 2021.

Synergies from Red Hat buyout are enabling IBM to boost its hybrid cloud initiative. The company had acquired Red Hat in 2019 for $34 billion.

With the Red Hat buyout, the company has been aiding enterprises ramp up digital transformation by offering Linux operating system, Red Hat Enterprise Linux, and hybrid cloud platform — Red Hat OpenShift. At present, more than 2,600 clients are leveraging Red Hat and IBM’s hybrid cloud platform.

In third-quarter 2020, revenues from Red Hat soared 16% on a normalized basis. The company added 125 IBM Services clients that are deploying Red Hat technology.

Nonetheless, rising expenses on hybrid cloud platform amid tough competition in the cloud space from the likes of Amazon’s (AMZN - Free Report) Amazon Web Services and Microsoft’s (MSFT - Free Report) Azure is likely to limit margin expansion, at least in the near term.

Currently, IBM carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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