Could IBM’s Acquisition Strategy Boost Revenues?



IBM’s acquisition strategy is likely to boost revenues

So far, we’ve looked at expectations from International Business Machine’s (IBM) fiscal 3Q16 results, strategic acquisition of Promontory Financial Group, and initiatives to better equip Watson in the rapidly growing IoT (Internet of Things) space. The company’s IoT, Watson Health, and focus areas of its cloud computing business fall under the IBM Cognitive Solutions segment. Within this segment, cloud revenues rose 55%, as you can see in the graph below.

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Cognitive Solutions’ revenue was buoyed by the acquisition and integration of the Weather Company assets and Truven Health Analytics into Watson. Prior to Truven, IBM acquired Merge Healthcare for $1 billion. In 2015, the company also announced the acquisition of Phytel and Explorys to boost its Watson Health unit.

So far in 2016, IBM has announced 11 acquisitions. Almost all of them have been acquired strategically to boost its Strategic Imperatives. In the first half of 2016, IBM spent $5.4 billion on acquisitions. The company said that acquisitions provided a 2 percentage point boost to its revenue in fiscal 2Q16 and that acquisitions are expected to contribute more to its top-line growth in the second half of fiscal 2016.

IBM’s acquisition and partnership strategy will most likely continue

IBM has pursued strategic acquisitions, but it has also sought after partnerships to boost its position in the cloud space. In 2016, IBM partnered with Cisco (CSCO) and VMWare (VMW) to improve its position in various spheres of the cloud space.

By joining hands with Cisco, IBM aims to increase its position in the workplace collaboration space. With the VMWare partnership, its position in the hybrid cloud space could strengthen its already leading role in the hybrid cloud space.


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