‘s (IBM) broad product and services portfolio delivers value to clients through a combination of services, hardware and software. The key verticals for IBM in the Indian market are infrastructure, such as construction and steel; telecom; industrial; energy and utilities. It also witnesses growth in the insurance and banking, travel and transportation, and the government spaces.

We therefore favor IBM for its wide range of products and large international exposure. IBM generates over a billion dollars in revenue from the Indian market. Revenue at IBM was driven by double-digit growth in markets such as India and China, which were up 10.0% in 2008. IBM expects these growing markets to drive revenue and increase growth beyond 2009.

In comparison to the slowing U.S. markets and weak IT spending, the Indian market is still relatively healthy as are other emerging markets. Specifically, the ‘BRIC’ region ( Brazil, Russia, India and China ) is developing rapidly and should outpace spending growth of developed countries.

According to research firm Gartner, global IT spending is expected to decline 6% to $3.2 trillion, while Indian IT spending is forecasted to grow 5.5% in 2009.

The demand for software products and solutions is showing signs of a strong comeback in the Indian market. IBM’s software business is positive on its new projects, which will help various firms lower costs and improve productivity.

Due to an economic recession, large IT service providers such as Amazon (AMZN), Google (GOOG) and Sun Microsystems (JAVA) are turning their attention to the Indian domestic market to produce goods and services at a much lower cost, resulting in intense competition for IBM, who has long dominated the local market.

The Indian market is the cost cutting center for large international corporations. IBM faces a significant number of competitors, ranging from traditional players such as Hewlett Packard (HPQ) and Microsoft (MSFT) to an increasing number of relatively small, rapidly growing and highly specialized organizations.

While competition is intense in the Indian market, IBM remains positive through its focus on asset-based services. IBM has invested in developing templates, asset-based solutions and reusable components exclusively for Indian clients. The company has partnered with SAP AG (SAP) for developing templates.

With the strength of its global on-demand model (responding to customer demand with flexibility and speed), IBM is experiencing strong revenue growth in all geographies, with robust growth in emerging markets worldwide. We maintain our Outperform rating IBM.

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