IBM (IBM) has entered into a definitive agreement to acquire TRIRIGA, a privately held facility and real estate management software solutions provider, for an undisclosed amount.
The transaction will be completed in the second quarter of 2011, subject to regulatory approvals and customary closing conditions.
TRIRIGA is set to be incorporated into IBM Trivoli software and IBM Global Services.
Nevada-based TRIRIGA’s software enables managers to optimize facility utilization, thus maximizing the 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.
Specific benefits of TRIRIGA’s software applications include monitoring of environmental factors to ascertain recycling rates and energy consumption, thereby aiding the facility managers in making 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, as predicted by The American Council for an Energy Efficient Economy. The company already expects smarter building products to generate revenues of approximately $10 billion by 2015.
IBM is not new to smart building. The company has been building a position in the segment by partnering with the likes Schneider Electrics, Johnson Controls Inc. (JCI) and Honeywell International Inc. (HON).
In fact, IBM’s partnership with Schneider Electrics in a data center efficiency project on the Bryant University Campus in Rhode Island has been extremely successful, with the project seeing a 15% drop in power usage.
Following the acquisition, IBM will directly compete with Siemens, Cisco Systems (CSCO), Honeywell, Johnson Controls 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. We think the opportunity is particularly significant, since it is a relatively nascent market. While other players do exist, this should not be seen as a negative, in our opinion given the strong demand for efficiency and cost effectiveness in commercial and industrial markets all over the world. Particularly so since there will be different approaches to solving the problem (such as the one followed by Cisco).
IBM holds a Zacks #2 Rank, which translates into a Buy rating in the short term.
In the longer term, we remain Neutral on IBM due to macroeconomic conditions comprising currency fluctuations, European weaknesses, decreased service contract signings, slower-than-expected IT spending growth and increasing competition.
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