Technology giant International Business Machines (IBM) announced a 10-year, multi-million dollar agreement with India-based ElectraCard Services (ECS), a leading provider of software solutions for electronic payment systems.
Under the terms of agreement, IBM will provide technical support for ECS’s disaster recovery infrastructure, giving ECS the scope to focus on core business while lessening its capital expenditures.
Armed with IBM’s solution support, ECS’s electra solution suite will enable its clients, including State Bank of India, Deutsche Bank (DB), Life Insurance Corporation of India, Corporation Bank, and many other leading private national and international banks to better manage their growing customer base.
The growth trends in e-commerce or online payments indicate a shift in consumer preference towards more transparent and flexible payment solutions. We feel more companies like ECS will find it easier to delegate responsibilities to IBM for its domain expertise and technology competence with regard to scalability and security, paving the way for recurring revenue growth.
Recently, IBM took another step towards expanding its software portfolio by entering into a joint venture with five other tech giants. The company joined with ARM Holdings Plc (ARMH), Samsung Electronics Co., Texas Instruments Inc. (TXN), Freescale Semiconductor Inc. and ST-Ericsson to form a non-profit company, Linaro.
The newly formed company will facilitate the speedy development of Linux-based software compatible with ARM designs for mobile phones, tablet PCs and other hybrid products.
This initiative is expected to be of significance to IBM, as the company will be able to take a larger share in the wireless market, thereby increasing competition to tech giants such as Intel Corp (INTC) and Microsoft Corp (MSFT), which are looking to move beyond their traditional personal computing market.
In the first quarter, the company reported a 5.0% year-over-year increase in revenue due to strength across its business segments (except the Global Financing segment) and geographic regions. The company ended the quarter with a hefty cash balance of $12.5 billion, but also carries a long-term debt burden of $21.3 billion.
We maintain our short-term Hold recommendation on IBM.
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