IBM Corp. (IBM) launched the latest version of WebSphere Application Server (WAS) at the IMPACT 2011 conference. The new version of WAS is designed to increase the client’s security and control, while delivering automated enhancement for the installation, maintenance, testing and trouble shooting of business applications.
WebSphere was first developed in 1997 and has since been IBM’s middleware software. It enables web applications and computer operating systems to operate on the same platform.
The latest version of WebSphere Application Server 8 software is expected to accelerate the development of applications and services. Moreover, it also provides support to applications ranging from the desktop to mobile devices, including smartphone and tablet variants like iPad, iPhone, Droid and BlackBerry, among others.
The enhancements in the WebSphere Application Server 8 software will likely help clients explore the relatively new cloud market through the mobile platform, improving their revenues and customer base. Therefore, the 100,000 WebSphere clients could expand significantly.
Analysts estimate that the mobile application market will grow $25 billion by 2015, marking a significant increase from $6.8 billion in 2010. Therefore, growth opportunities are substantial.
IBM has a number of innovations to facilitate cloud computing. One of the most recent was a computing service called “Smart Cloud”. Meanwhile, other big players and IBM’s competitors are also speeding up their technical know-how in order to penetrate the emerging market of cloud computing.
IBM has identified cloud computing as one of the key growth drivers in addition to business analytics, sales in emerging markets and the Smarter Planet initiative. These are expected to contribute approximately $20.0 billion in revenue growth by 2015.
We remain optimistic on the company’s long-term growth following the bullish outlook provided by management. Strong service backlog, a diversified product pipeline, and higher growth from outsourcing and business analytics will cumulatively boost top-line growth going forward.
We also believe that IBM’s growing initiatives in the smarter planet, business analytics and optimization and cloud computing areas will drive long-term growth. Besides, the ability to generate strong free cash flow, expand margins and improve the already robust balance sheet make the stock attractive over the long term.
However, all these positives notwithstanding, we have a Neutral recommendation on IBM due to currency fluctuations, decreasing contract signings and increasing competition from Accenture Plc. (ACN), Hewlett-Packard Company (HPQ) and Microsoft Corporation (MSFT) remain the primary headwinds.
Currently we have a Zacks #3 Rank for IBM, which translates into a Hold rating in the short term.
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