IBM's New Deal Win in Mexico

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International Business Machines Corp. (IBM) announced that it will upgrade Circulo K Mexico’s IT infrastructure by deploying its PureSystems applications. Circulo K Mexico, a convenience store chain-subsidiary, will be using different applications and products from the PureSystems product range such as PureFlex System, Pure Application System and PureData System.

IBM’s PureSystems helps clients to create and manage IT infrastructure platform and provide cloud computing capabilities in a cost effective and timely manner. By deploying IBM’s industry tested enterprise applications, Circulo K will be able to serve its customers more efficiently. Previously, Circulo K was using Dell’s (DELL) IT platform.  

The current deal win bodes well for IBM as the company has been making significant investments in Mexico and has opened its seventh office in Merida. The company has invested approximately $4 million for the Merida office, which is located in the Yucatan metropolitan zone. IBM already has offices in the Mexico City, Queretaro, Monterrey, Toluca, Guadalajara and Puebla.

It is noteworthy that IT spending in Latin America is projected to grow by 6.4% and 9.1% in 2013 and 2014, respectively, according to Forrester Global Tech Market Outlook. Moreover, Frost and Sullivan expects IT spending in Latin America to be grow 7% over the next couple of years, particularly in Mexico and Brazil. Thus, IBM’s initiatives to expand in the region are expected to be beneficial for the company going forward.

We believe that IBM has a vast product portfolio that will boost its market share going forward. Moreover, with strong balance sheet and incremental revenues, the company’s strategic acquisitions and partnerships will have a positive impact in the long run.

Moreover, we believe that IBM remains well positioned for long-term growth based on its four key growth initiatives: smarter planet, growth markets, business analytics and cloud computing. We believe that IBM’s strong product pipeline, expansion into emerging markets and continuous acquisitions will help it to achieve this target going forward.

However, unfavorable foreign currency, sluggish macro economic environment and stiff competition from Oracle Corp. (ORCL) and EMC Corp. (EMC) are the other headwinds going forward.

Currently IBM has a Zacks Rank #2 (Buy).

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