A leading provider of information technology (IT) solutions and services, International Business Machines Corp. (IBM), recently opened its second office in the south Indian state of Tamil Nadu. The new Indian office, a part of IBM’s expansion policies in India, is located in Coimbatore.
IBM has been expanding its footprint in India and has a presence in the major metropolitan cities of the country (over 14 cities in India). The latest office in Coimbatore is expected to serve the region’s fast-growing economy.
IBM already has an office in Tamil Nadu’s capital city, Chennai. The Coimbatore office is expected to improve its access to customers in health care, government, banking, textiles, engineering, manufacturing and IT services going forward.
IBM is one of the largest technology companies operating in the private sector in India. IBM expects to expand its operations to 40 Indian cities by 2013.
IBM remains focused on increasing its footprint in the growing economies of the Asia-Pacific region, particularly in China and India. In the first quarter ended March 31, 2011, the region contributed 24.0% of its total revenue and increased 12.0% year over year, fastest among all other geographic regions.
IBM has been gaining a lot of traction in emerging markets, with many government agencies from different countries in the Asia-Pacific regions choosing IBM’s services and technical support for their operations, thus ensuring steady flow of orders and market share gains across regions.
In early March 2011, IBM and The Karnataka Vocational Training and Skill Development Corporation (KVTSDC), an organization within the Department of Labour in one of India’s fastest growing states, announced a new partnership to help millions of citizens find work using their mobile devices.
In March 2011, IBM opened its 30th branch in China, in the City of Hohhot in Inner Mongolia. With the new office in Hohhot, IBM expects to help the Inner Mongolian government to further pursue its economic development and industrialization program, especially in the establishment of IT parks.
IBM also announced a $38 million investment to build a new IBM Asia-Pacific Cloud Computing Data Center in Singapore to exploit the potential of cloud computing through its comprehensive solutions and services.
The company has 13 global cloud labs, of which seven are based in the Asia-Pacific countries of China, India, Korea, Japan, Hong Kong, Vietnam and Singapore.
In March 2011, IBM also commenced a new Power Systems development laboratory in Taiwan, which is the company’s first research centre outside the US.
Currently, IBM has more than 230 offices in 53 developing countries. IBM expects these growth markets to drive revenues in 2011 and beyond. In 2010, IBM generated 29.0% of its total systems revenues from these markets. The company expects revenues from these markets to grow at least 40% by 2015.
IBM expects growth markets to contribute 30.0% of its total geographic revenue by 2015, up from 21.0% in 2010.
Recommendation
We believe that IBM will continue to benefit from its spate of new initiatives like smarter planet, business analytics and optimization, and cloud computing over the long term.
However, IBM continues to face stiff competition from a number of companies, including Hewlett Packard Co. (HPQ), Microsoft Corp. (MSFT), Oracle Corp. (ORCL) and EMC Corp. (EMC).
We remain Neutral over the long term (6-12 months) based on the belief that the company’s shares are fairly valued at current levels.
Currently, IBM has a Zacks #3 Rank, which implies a short-term Hold rating.
