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IBM Closes Buyout of Regulatory Compliance Firm Promontory

Zacks Equity Research

International Business Machines Corporation IBM has announced the completion of its acquisition of Promontory Financial Group, a leading risk management and regulatory compliance consulting firm.

What Led to the Acquisition?

Today, financial regulations and risk management requirements are changing rapidly. These demand substantial operational efforts and costs to keep pace with. With Promontory’s expertise in the aforementioned field, the acquisition is likely to strengthen IBM’s capabilities going ahead. Additionally, with Watson that is equipped with cognitive capabilities, IBM will be able to speed up its development of cognitive solutions for compliance and risk management.




What Does this Mean for IBM?

The Promontory acquisition will complement the Industry Platforms business of IBM, which has been created to offer “as a service” offerings custom built for individual industries. We note that,  this will combine the benefits of the IBM Cloud, Watson and industry specific capabilities of specialized providers to achieve enhanced efficiency, security, quality and transparency while lowering operational costs.

In other words, IBM is trying to strengthen its presence in the cloud business that is gathering steam with every passing day.

As per an IDC report, worldwide spending on cognitive systems is estimated to reach over $31 billion by 2019 growing at a CAGR of 55%. Notably, the banking sector alone will account for 20% share of the total spending on cognitive systems.

Intensifying Competition

We note that competition is intensifying in the financial regulations and risk management segment with the presence of players such as ICI Consulting, Primatics Financial, LLC and Resources Global Professionals. However, the Promontory deal puts IBM in good stead among its peers. 

Zacks Rank & Key Picks

At present, IBM has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Applied Optoelectronics, Inc. AAOI, Acacia Communications, Inc. ACIA and Advanced Energy Industries, Inc. AEIS, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for Applied Optoelectronics’ current year improved to 81 cents from 51 cents over the last 30 days.

The consensus estimate for Acacia’s current year improved to $2.33 from $2.28 over the last 30 days.

Last but not the least, the consensus estimate for Advanced Energy’s current year improved to $2.67 from $2.51 over the last 30 days.

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