We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is IBM's Hybrid Cloud Strategy Headed in the Right Direction?
Read MoreHide Full Article
International Business Machines (IBM - Free Report) is aiming to turnaround its business by pursuing opportunities in the lucrative cloud space, especially hybrid cloud domain. The company considers hybrid cloud as a $1 trillion opportunity.
Even before the COVID-19 crisis, enterprises were rapidly shifting their workloads to cloud. Migration to cloud offers enterprises increased scalability, faster deployment as well as cost efficiency and higher security.
The pandemic has only accelerated this shift. The lockdown restrictions have boosted demand for cloud-based video conferencing apps, gaming, online learning, and e-commerce services.
The spending on cloud services, globally, is projected to witness a CAGR of 15.7% between 2020 and 2024 and surpass $1 trillion, per an IDC report.
International Business Machines Corporation Price and Consensus
Increasing migration of workloads to cloud will drive demand for solutions ranging from human capital management, to cloud infrastructure monitoring as well as web-based application performance management. This underscores massive growth opportunity for cloud service providers like IBM.
To gain ground in the cloud market, IBM is on an acquisition spree. The tech giant has acquired many startups in the last few months to bolster its cloud initiative.
A Look at IBM’s Recent Acquisitions
To date, IBM’s largest cloud-based acquisition remains Red Hat. The company was purchased by IBM for $34 billion in 2019. The buyout enabled IBM to boost containerized software capabilities. Red Hat and IBM’s hybrid cloud platform is being used by more than 2,600 clients.
Currently, the company is acquiring relatively smaller but intensely cloud-focused companies/startups to meet its hybrid cloud vision.
A few days back, IBM announced the takeover of Finland-based cloud-focused start up — Nordcloud — for an undisclosed amount. Nordcloud will help the company expand footprint in the cloud professional services vertical.
Notably, Nordcloud boasts a triple certification for Amazon’s (AMZN - Free Report) Amazon Web Services (AWS), Microsoft’s (MSFT - Free Report) Azure and Alphabet’s (GOOGL - Free Report) Google Cloud.
Earlier, IBM acquired Expertus Technologies Inc to enhance its end-to-end digital payments offerings. The TruQua Enterprises, LLC buyout will support IBM customers in implementing SAP solutions like S/4HANA to automate and upgrade financial processes such as budgeting and cash flow.
IBM announced the Instana acquisition in November 2020. The company specializes in offering “observability” and application performance monitoring functionalities.
IBM’s Split Aimed at Accelerating Hybrid Cloud Strategy
Further, to capitalize on this trend, in October 2020, IBM announced the split of its business in two separate units. The tech giant will spin off (tax free) Managed Infrastructure Services, a unit of its Global Technology Services segment, into a new company by the end of 2021.
IBM stated that post the spin-off, the new company will have 4,600 customers across 115 countries and with a backlog worth $60 billion.
Headwinds Persist
Escalating costs on hybrid cloud platform amid intensifying competition in the cloud vertical from the dominant players like AWS, Azure and Google Cloud pose a major headwind.
Also, increasing debt levels amid extensive restructuring efforts weigh on the stock. As of Sep 30, 2020, IBM’s total debt (including $20.9 billion from Global Financing debt) was $65.4 billion. In comparison, the company had $15.8 billion in total cash and marketable securities as of Sep 30, 2020.
Markedly, in the third quarter of 2020, IBM reported 2.6% year-over-year decline in revenues. Also, the company witnessed a 7.3% decline in its share price against the S&P 500’s gain of 17.8%.
We believe that though the company is not in great shape right now, its cloud strategy is likely to pay off in the long term.
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
Image: Bigstock
Is IBM's Hybrid Cloud Strategy Headed in the Right Direction?
International Business Machines (IBM - Free Report) is aiming to turnaround its business by pursuing opportunities in the lucrative cloud space, especially hybrid cloud domain. The company considers hybrid cloud as a $1 trillion opportunity.
Even before the COVID-19 crisis, enterprises were rapidly shifting their workloads to cloud. Migration to cloud offers enterprises increased scalability, faster deployment as well as cost efficiency and higher security.
The pandemic has only accelerated this shift. The lockdown restrictions have boosted demand for cloud-based video conferencing apps, gaming, online learning, and e-commerce services.
The spending on cloud services, globally, is projected to witness a CAGR of 15.7% between 2020 and 2024 and surpass $1 trillion, per an IDC report.
International Business Machines Corporation Price and Consensus
International Business Machines Corporation price-consensus-chart | International Business Machines Corporation Quote
Further, according to a report from Mordor Intelligence, hybrid cloud market is forecast to witness a CAGR of 18.73% between 2020 and 2025 and hit $128.01 billion.
Increasing migration of workloads to cloud will drive demand for solutions ranging from human capital management, to cloud infrastructure monitoring as well as web-based application performance management. This underscores massive growth opportunity for cloud service providers like IBM.
To gain ground in the cloud market, IBM is on an acquisition spree. The tech giant has acquired many startups in the last few months to bolster its cloud initiative.
A Look at IBM’s Recent Acquisitions
To date, IBM’s largest cloud-based acquisition remains Red Hat. The company was purchased by IBM for $34 billion in 2019. The buyout enabled IBM to boost containerized software capabilities. Red Hat and IBM’s hybrid cloud platform is being used by more than 2,600 clients.
Currently, the company is acquiring relatively smaller but intensely cloud-focused companies/startups to meet its hybrid cloud vision.
A few days back, IBM announced the takeover of Finland-based cloud-focused start up — Nordcloud — for an undisclosed amount. Nordcloud will help the company expand footprint in the cloud professional services vertical.
Notably, Nordcloud boasts a triple certification for Amazon’s (AMZN - Free Report) Amazon Web Services (AWS), Microsoft’s (MSFT - Free Report) Azure and Alphabet’s (GOOGL - Free Report) Google Cloud.
Earlier, IBM acquired Expertus Technologies Inc to enhance its end-to-end digital payments offerings. The TruQua Enterprises, LLC buyout will support IBM customers in implementing SAP solutions like S/4HANA to automate and upgrade financial processes such as budgeting and cash flow.
IBM announced the Instana acquisition in November 2020. The company specializes in offering “observability” and application performance monitoring functionalities.
IBM’s Split Aimed at Accelerating Hybrid Cloud Strategy
Further, to capitalize on this trend, in October 2020, IBM announced the split of its business in two separate units. The tech giant will spin off (tax free) Managed Infrastructure Services, a unit of its Global Technology Services segment, into a new company by the end of 2021.
IBM stated that post the spin-off, the new company will have 4,600 customers across 115 countries and with a backlog worth $60 billion.
Headwinds Persist
Escalating costs on hybrid cloud platform amid intensifying competition in the cloud vertical from the dominant players like AWS, Azure and Google Cloud pose a major headwind.
Also, increasing debt levels amid extensive restructuring efforts weigh on the stock. As of Sep 30, 2020, IBM’s total debt (including $20.9 billion from Global Financing debt) was $65.4 billion. In comparison, the company had $15.8 billion in total cash and marketable securities as of Sep 30, 2020.
Markedly, in the third quarter of 2020, IBM reported 2.6% year-over-year decline in revenues. Also, the company witnessed a 7.3% decline in its share price against the S&P 500’s gain of 17.8%.
We believe that though the company is not in great shape right now, its cloud strategy is likely to pay off in the long 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.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
Download Marijuana Moneymakers FREE >>