International Business Machines Corp.’s (IBM - Free Report) power systems and storage solutions are expected to boost Bank Ekonomi Raharja’s (“BER”) IT infrastructure to support the Indonesian bank’s expanding clientele.
Headquartered in Jakarta, BER is owned by HSBC. BER has presence in 29 cities with 97 branches across Indonesia. IBM’s industry proven power systems coupled with storage products and services will upgrade the bank’s IT infrastructure, helping the bank to serve its clients better. Moreover, IBM will help BER to expand services to rural and remote places through the bank’s mobile and online banking facilities.
IDC estimated early this year that Indonesia will be among the top five ‘IT spending hotspots’ this year. The IT spending growth was expected to be largely backed by the banking segment. IDC expects the banking sector's IT budget to grow by 14.3% in 2012. Another research by Business Monitor International predicted that IT spending in Indonesia would grow 11% in 2012 to $5.9 billion.
We believe that IBM’s significant presence in the region and its wide array of IT solutions will be incrementally beneficial for the company in the long term. IBM has offices in Jakarta, Semarang, Surabaya, Makassar and Medan, to which the company recently added Bandung.
We believe that IBM remains well positioned for long-term growth based on its four key growth initiatives: smarter planet, growth markets, business analytics and cloud computing, which are expected to deliver at least $50 billion in revenues by fiscal 2015. We believe that IBM’s strong product pipeline, expansion into emerging markets and continuous acquisitions will help it to achieve this target going forward.
However, unfavorable foreign currency, increasing competition from Microsoft (MSFT - Free Report) and Accenture (ACN - Free Report) , and stiff year-over-year comparisons in the hardware segment may hurt profitability in the near term.
Currently, IBM has a Zacks #3 Rank, which translates into a short-term Hold rating.