International Business Machines Corporation IBM recently revealed that it is considering the acquisition of Bluewolf Group LLC, a prominent player in cloud consulting and implementation services.
Bluewolf, which is at present one of the important partners of Salesforce CRM, is expected to add significant value to IBM’s cloud business. The deal is expected to be concluded by the second quarter of 2016. Media reports estimate the deal value to be $200 million, though it has not yet been affirmed by IBM or Bluewolf.
IBM expects to combine its own strengths (experience design, data integration, cloud and analytics) with Bluewolf’s capabilities to develop cutting-edge Salesforce consulting practices, especially in the midmarket and enterprise segment. Following the acquisition, Bluewolf will be integrated with IBM’s Interactive Experience (iX) division.
This would be the tenth acquisition by IBM in the cloud space. Over the last few years, the company has been significantly expanding its presence (through both organic growth and acquisitions) in higher-margin businesses like cloud and analytics. In 2015, its sales in cloud-based solutions grew 43% year over year to over $10 billion.
As per its Oct 2015 report, IDC expects cloud IT infrastructure spending to grow at a CAGR of 15.1% by 2019 to $53.1 billion. IBM’s constant efforts to develop its cloud offerings place it well to tap the booming market. The aforementioned acquisition will enable IBM to benefit from the shift to efficient and flexible cloud-based solutions from legacy CRM platforms.
On the other hand, this will be a favorable deal for Bluewolf given the scope for growth. As Bluemix CEO Eric Berridge puts it "I believe we have the perfect alliance as part of the IBM iX team -- equally sharing our passion, discipline and desire to be a global leader in the Salesforce partner ecosystem with the scale, skills and expertise of IBM iX to catapult us there."
Separately, IBM made a couple of announcements yesterday – the launch of its Bluemix Garage Method and its plans to build the Watson Health European Center of Excellence in Italy.
All these developments pushed IBM shares up over 2% to $151.45 at the close of the trading session yesterday.
At present, IBM carries a Zacks Rank #4 (Sell). Better-ranked stocks in the same space include Mentor Graphics Corp. MENT and Iteris, Inc. ITI, both sporting a Zacks Rank #1 (Strong Buy).
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