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IBM to Aid Juniper to Enhance IT and Cloud Infrastructure

Zacks Equity Research

International Business Machines Corporation IBM recently entered into a seven-year agreement with Juniper Networks JNPR for $325 million.

Per the terms of the deal, IBM Services platform integrated with automation and cognitive capabilities of Watson will be utilized by Juniper. This in turn will aid Juniper in managing its IT infrastructure effectively by making it more agile and efficient.

Further, IBM Services will launch a "Factory Development" concept, in a bid to accelerate Juniper’s application management processes.

Notably, growing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence calls for robust IT infrastructure management services. This is where IBM Services come in handy.

In fact, the deal is a big win for IBM since Juniper is a dominant player in providing networking solutions and communication devices. The incremental adoption of IBM Services is expected to aid the financial performance of the company in the foreseeable future.

International Business Machines Corporation Revenue (TTM)

International Business Machines Corporation Revenue (TTM) | International Business Machines Corporation Quote

Key Takeaways: Both IBM & Juniper to Benefit

In a nutshell, with the transformed IT environment, IBM aims to assist companies with a democratized approach towards a hybrid cloud model.

Per IBM's estimates, roughly 85% of the companies (which were surveyed) are utilizing multiple cloud computing platforms rather than depending on a single one.

Moreover, digital transformation initiatives and hyperscale datacenter development are the primary catalysts behind cloud-based IT infrastructure expansion.

The expanding customer base strengthens the company’s growth prospects in the digital transformation market, which per a MarketsandMarkets report, is envisioned to witness a CAGR of 19.1% to $493.39 billion by 2022 from $205.99 billion in 2017.

As a result, IBM seems well-positioned to capitalize on projected growth. The report only reinforces our belief that IBM’s services hold immense potential.

With dynamic improvement in machine learning (ML) and edge computing gaining steam, increasing spend on infrastructure products enhances the prospects of IBM in the deal.

Notably, the latest agreement is likely to aid Juniper’s plans on various novel projects.

The deal is likely to enhance Juniper’s prospects in gaining incremental market share as cloud, service providers gain popularity amongst enterprise customers.

Bottom Line

We believe it is a win-win situation for both the companies involved as it enables them to realize their respective business goals. In fact, IBM is expected to strengthen its foothold in the IT services space.

However, rising competition from Amazon’s AMZN Amazon Web Services (AWS) and Microsoft’s MSFT Azure in the cloud domain is a headwind.

Zacks Rank

IBM carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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