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IBM Buys Xtify

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IBM Corp. (IBM - Free Report) recently announced the takeover of Xtify, a New-York based mobile marketing service provider for an undisclosed amount. This is IBM’s second acquisition in two days, after the company acquired The Now Factory on Oct 2.

Founded in 2009, Xtify provides cloud-based mobile messaging tools that help marketers target current and prospective customers and improve in-store traffic and engagement, which in turn boosts sales. Xtify’s cloud-based platform tracks the movement of e-commerce traffic and helps marketers send personalized messages about new contents and offers.

Xtify’s service can keep track of the movements of traffic irrespective of whether they are using desktop computers or smartphones. The company has a significant clientele that includes the like of Sephora, Disney Stores, The Tribune Group and 20th Century Fox.

IBM will integrate Xtify into MobileFirst software and smarter cloud divisions, both of which specialize in offering mobile advertising solutions. IBM also said that the Xtify service will run from the datacenters, which the company gained from the acquisition of SoftLayer in June.

The recent acquisition reflects IBM’s continuing focus on developing its smarter commerce product portfolio. Since 2010, the company has spent approximately $3.5 billion on acquisitions to develop its offerings.

Xtify’s takeover will expand IBM’s reach in the mobile payments transaction market, which market research firm Gartner expects to reach $235.4 billion in 2013, up 44.0% from 2012. We believe that this presents significant growth potential over the long term.

Xtify’s acquisition also reflects IBM’s commitment to growing its cloud-based business, one of the four major growth vehicles as per its 2015 roadmap. The company has invested approximately $6.0 billion on acquiring different cloud based start-ups to expand its product portfolio.

In fiscal 2012, IBM completed 11 acquisitions for an aggregate cost of $3.96 billion. IBM plans to spend approximately $20.0 billion on acquisitions though 2015, which is expected to boost top-line growth by approximately 2.0%. We believe that IBM will continue to pursue strategic acquisitions to boost its product portfolio, going forward.

However, IBM is expected to face tough competition from the likes of Oracle Corp. (ORCL - Free Report) , Hewlett-Packard Co. (HPQ - Free Report) and Microsoft Corp. (MSFT - Free Report) in the near term.

Currently, IBM has a Zacks Rank #3 (Hold).

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