International Business Machines (IBM) won a three-year contract to provide IT infrastructure and services to Cinepolis, a privately held company based in Morelia, Mexico. The deal was signed in August 2009, but the terms of the contract were not disclosed.
Cinepolis is one of the largest movie theater and multiplex operators in India and will use IBM’s expertise in its IT solutions to roll out 130 new theaters in India over the next 3 years. IBM will provide Point of Sale (PoS), kiosks, server, storage, software, networking and related services to Cinepolis.
IBM’s unique Store Roll Out solution will help Cinepolis reduce operating expenses as well as develop and deploy new customer applications. Cinepolis plans to open 500 screens in India by 2016.
IBM is expected to get a boost from this new IT services contracts. We believe this deal to be strategic importance for IBM to grow its foothold in the Communications sector (particularly, Telecommunications, Media and Entertainment). IBM’s Global Services plays an important role in the company’s strategy of providing IT infrastructure, business insight and systems solutions.
The company’s diversification in terms of markets, geography and services will continue to facilitate future growth. Moreover, IBM’s restructuring efforts are making headway, resulting in an improved bottom line. The company’s plans to improve efficiencies, strengthen client-facing operations and capture opportunities in high-growth markets.
In addition, IBM has a very strong balance sheet and generated $18.8 billion from operating activities in 2008 through its efficient business model. Over the past six years, IBM generated nearly $65.0 billion in free cash flow. This provides it the financial flexibility required for strategic investments in changing business environments.
The company also has significant recurring revenue. Considering the company’s liquidity and emphasis on profitability, we believe IBM is a safe investment.
With new stimulus packages, investors can expect IT infrastructure projects to increase. Thus we believe IBM is sure to benefit from the growing IT services requirements. IBM’s major competitors providing similar services are Hewlett Packard (HPQ), Dell Inc. (DELL) and Cisco Systems (CSCO).
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