International Business Machines Corp. (IBM) announced that it has won an important customer in Travelport, a leading global distribution system (GDS) provider to provide new software designed to provide enhanced service for existing travel customers, open up new markets and expand travel options for consumers.

Under the multi-year, multi-million dollar agreement, IBM will provide Travelport with significant upgrades to the existing systems architecture and software infrastructure of its technology platform.

The agreement with IBM will help Travelport more than double the volume of information it processes for customers, including thousands of travel agencies, hotels and leading car rental companies, cruise and tour operators and major rail networks.
Travelport will utilize IBM technologies and work with IBM to upgrade its core system operating software to the IBM z/Transaction Processing Facility (zTPF). The agreement also includes elements of IBM’s software portfolio including WebSphere, Rational, Tivoli and Information Management products while also using IBM’s server and storage products.

This will help Travelport to facilitate broader travel and travel related content search, aggregation and integration from multiple sources in addition to the content traditionally stored within the GDS.

With the strength of its global on-demand model (responding to customer demand with flexibility and speed) IBM is experiencing increased customer wins across all geographies.

As part of its strategic focus of investing in differentiating technologies offering high-growth potential, IBM continuously launches new products and solutions which help to grow its customer base.

IBM’s results for 2009 were positive, with earnings beating the Zacks Consensus Estimate. The company reported better-than-expected revenue, margins and profitability. The company had won an impressive amount of new services contract signings. We believe IBM’s focus on expanding its customer base will help generate higher revenue, going forward.

IBM has also raised its earnings forecast and expects to return to revenue growth in 2010. We believe IBM’s high-margin recurring revenue business and its increase in profitability due to cost cuts and new contract wins will be the main driver of growth in 2010. Also, IBM’s longer-term service and software deals could bring an upswing in its top-line growth, while growing demand for outsourcing services will boost near-term sales.

We maintain our Neutral rating on IBM.
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