IBM Acquires Storwize - Analyst Blog

Information Technology giant International Business Machines Corp. (IBM) announced the completion of its acquisition of Storwize, a privately held data storage company. The deal was announced in July. The financial details of the acquisition were not disclosed.

 

Based in Marlborough, Massachusetts, Storwize develops online data compression software. IBM pointed out that Storwize also develops technology that reduces the amount of physical space required by companies to store data such as files, databases and images by up to 80%.

 

To strengthen its storage product portfolio, IBM had earlier acquired XIV that positioned the company to better address emerging storage opportunities, such as Web 2.0 and digital media.

 

IBM has been building its portfolio through strategic acquisitions, which are generating incremental revenues, strengthening its technology leadership and resulting in a more favorable mix of business. The acquisition of Storwize will enable IBM to expand further in the data storage market. Storwize will become part of IBM's systems and software group.

 

IBM said that the Storwize appliance will work with its NAS systems such as IBM N series, as well as non-IBM NAS systems from EMC Corp. (EMC), Hewlett-Packard Company (HPQ) and NetApp Inc. (NTAP).

 

Moreover, IBM also released its new Storage and System x offerings of late, which are designed to help midsized businesses manage information, increase flexibility and reduce the cost and complexity of the IT environment.

 

The company’s new x86 systems leverage IBM software and hardware to deliver optimized performance and accelerate roll-outs of high-performance clusters. The company also introduced a new storage-rich server designed for clients intending to cut costs and maximize internal storage capacity.

 

These initiatives added more than 200 customers to IBM’s client base. According to the company, these customers moved critical business workloads to IBM servers and storage systems from Oracle Corp. (ORCL), HP and other competitors.

 

Since 2004, more than 5,000 companies worldwide replaced their HP, Sun Microsystems (JAVAD) and EMC products with energy-efficient IBM Systems and Storage.

 

Companies have invested in IBM's System z, Power and System x servers as well as IBM Storage to tackle their most challenging business objectives and reduce sprawling data center costs.

 

In the total worldwide disk storage systems market, IBM was the leader with a 14.2% market share while HP held 11.7% market share during 2009, according to research firm, IDC. IBM outperformed storage software vendor EMC and HP in revenue growth in the fourth quarter of 2009, according to the new external disk storage systems market share data released by IDC.

 

Additionally, IBM grew its external disk storage systems revenues by 9% year over year during the fourth quarter of 2009, while the overall market decreased 0.7%.

 

IBM also saw gains in the Windows and Linux OS segments in 2009, including a 24% gain in Linux storage in a market that was down 4%.

 

For the long term, we remain positive on IBM’s high-margin recurring revenue business, new contract wins, strong portfolio of products and solutions, global expansion, increased dividend payouts and share repurchases.

 

IBM continues to proceed with its strategy of accretive acquisitions that can be easily integrated into its current business. The company plans to spend approximately $20.0 billion in acquisitions over the next 5 years.

 

We maintain our Neutral rating on the stock over the long term. The company currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock.