Information technology (IT) giant, International Business Machines Corp. (IBM) announced that it has completed the acquisition of TRIRIGA, Inc.
Las Vegas, Nevada-based TRIRIGA Inc. is a privately held company that provides real estate management software solutions. Financial terms of the transaction were not disclosed.
TRIRIGA is set to be incorporated into IBM Trivoli software and IBM Global Services.
TRIRIGA’s software enables managers to optimize facility utilization for maximizing returns from a capital investment. It also provides tools to assess real estate and environmental impact investments (increasingly required by law), thus facilitating intelligent decision-making.
TRIRIGA’s software applications enable monitoring of environmental factors to ascertain recycling rates and energy consumption, thereby aiding the facility managers in taking critical decisions regarding the efficient use of energy and monitoring of the desired results.
TRIRIGA caters to more than 200 clients, including a third of the Fortune 100 corporations and 15 departments of the US government.
With the TRIRIGA acquisition, IBM will be better positioned to capitalize on the $250 billion smart building opportunity going forward, as predicted by The American Council for an Energy Efficient Economy.
Smart Building is one of the important growth pillars of IBM’s Smarter Planet initiative. IBM expects to earn revenues of $10.0 billion from its Smarter Planet initiatives by 2015.
However, IBM is expected to face strong competition from Siemens AG (SI), Cisco Systems (CSCO), Honeywell International Inc. (HON), Johnson Controls Inc. (JCI) in the smart building software business.
We are incrementally positive on IBM in the smart building segment and expect the company to continue building its capabilities with smarter innovations and strategic acquisitions.
IBM is focused on expanding its product portfolio and leveraging its global scale through accretive acquisitions that can be easily integrated into its current businesses.
In 2010, IBM completed 17 acquisitions, with the Software segment acquiring 13 companies, the Systems and Technology segment acquiring 2 companies, and the Global Business Services (GBS) and the Global Technology Services acquiring one each.
IBM plans to spend approximately $20.0 billion in acquisitions over the next 5 years, which is expected to generate earnings of 90 cents each year.
IBM expects to achieve earnings of approximately $20.00 per share by 2015 aided by base revenue growth of 2.0%, 1.0% from a shift to a faster growing business mix and 2.0% from acquisitions.
Recommendation
We remain optimistic on the company’s long-term growth following the bullish outlook provided by management, based on IBM’s growing initiatives in the Smarter planet, business analytics and optimization and cloud computing areas.
However, we remain Neutral over the long term due to macroeconomic conditions comprising currency fluctuations, European weaknesses, decreased service contract signings, slower-than-expected IT spending growth and increasing competition.
IBM has a Zacks #3 Rank, which translates into a Hold rating over the short term.
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