International Business Machines Corp. (IBM) recently signed a seven-year agreement with the Identity and Passport Service (IPS) of UK to facilitate the Government’s plans to upgrade to biometric passports and enhance the security of the UK border. IPS is an executive agency of the UK Home Office.
By using this technology, the passport office will be able to store databases related to facial and fingerprint images for the next generation of biometric passports and will support the delivery of the National Identity card. We believe this is a goldmine opportunity for IBM, as the usability of this technology is vast and the company hopes to receive perpetual benefit.
If IBM can execute this project well, maintain quality and complete it within the given deadline, then revenue flow from these types of government projects will be substantial.
IBM will also provide a replacement for the UK Border Agency’s (UKBA) Immigration and Asylum Fingerprint System (IAFS), which holds biometrics collected from visa applicants. In the coming days, other governments will also adopt the same technology and IBM with its renowned brand name, can grab a major share of that pie. IBM’s Q109 results indicate its strong position in emerging markets, which should continue to help drive growth.
The company is expecting long term contracts from its service customers as opposed to short-term initiatives to cut costs. The company’s long-term prospects look brighter as it maintains a strong position in the software and services market. We maintain our Buy rating on IBM shares.
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