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IBM is Pursuing Acquisitions to Push its Strategic Imperatives

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IBM aggressively seeks revenue growth through acquisitions

Previously in this series, we discussed IBM’s (IBM) recent acquisitions: Ecx.io, Aperto, and Resource/Ammirati in the digital agency space as well as Ustream in the cloud space. These acquisitions are aimed to complement its Strategic Imperatives initiative that posted double-digit growth in fiscal 4Q15. Its contribution also increased to 35% in fiscal 2015.

However, despite IBM’s Strategic Imperatives’ double-digit growth, IBM has been unable to post any revenue growth in the last 15 consecutive quarters. As a result, IBM’s stock touched a five-year low in late 2015.

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IBM’s acquisitions could return GBS segment to revenue growth

However, despite IBM’s Strategic Imperatives posting double-digit growth and spending more than $3 billion to acquire 14 companies in 2015, revenue growth continues to be elusive to IBM. Its GBS (Global Business Services) segment, of which Interactive Experience (or iX) is a part, failed to report any growth in fiscal 4Q15.

In fiscal 4Q15, GBS revenue fell by 9.9% to $4.3 billion in fiscal 4Q15. Apart from iX, the GBS segment also encompasses cloud and analytics. IBM’s recent acquisition, UStream, which is a live-video streaming service, could boost the company’s Cloud Video Services Unit.

Apart from its acquisitions, IBM adopted the partnership route to ensure that Strategic Imperatives continues to drive growth. In the prior part of this series, we discussed how IBM’s acquisition of Ecx.io, Aperto, and Resource/Ammirati could boost the company’s position in partnerships. IBM has joined with Apple (AAPL) and Twitter (TWTR) to solidify its presence in the software, cloud, and big data space.

Investors who want exposure to IBM can consider investing in the iShares US Technology ETF (IYW) and the iShares Russell 1000 ETF (IWB). IYW and IWB, which have respective 46.7% and 8.5% exposure to application software, invest ~12.5% and 0.61% of their holdings in IBM, respectively.

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