After getting entangled in a seemingly endless revenue tailspin that extends 12 quarters, International Business Machines Corp.’s (NYSE:IBM) need for a fast turnaround is an almost foregone conclusion.
IBM stock has been badly hammered due to its shrinking top line. That’s the reason why IBM investors should be cheering the continued success of Big Blue’s business analytics segment. IBM’s business analytics division is the only large segment segment by the company with more than $10 billion in revenues that is expanding in double digits.
IBM has lately been nabbing a good number of business analytics deals that have been allaying investor doubts about the ability of the company to compete against the usual Big Data suspects, such as Splunk Inc (NASDAQ:SPLK) and Tableau Software Inc (NASDAQ:DATA).
This is the reason why IBM’s business analytics segment, which brought in $17 billion in revenue for the company after growing 7% in 2014, grew even faster during the first quarter of this year after posting 12% growth (more than 20% in constant currency). That is remarkable considering its size.
While IBM stock is up 7% this year, it’s about 20% off its 2013 high of $214.
Let’s look at some significant business analytics deal that IBM has won recently, which I believe will give a much-needed boost to IBM stock.
IBM-Facebook
One recent example of IBM winning a business analytics deal was the contract it won from Facebook Inc (NASDAQ:FB) a couple of weeks ago.
Marketers who use Facebook’s platform will now be able to access IBM’s deep expertise in business analytics to better target their audiences. Facebook will become the first company to join IBM Commerce THINKLab in a collaborative effort to build technologies that brands can use to target their customers.
The ad space is rapidly changing, with many marketers preferring a new brand of automated ads called programmatic ads to traditional display ads. There is a lot of competition in the space, and several companies such as Yelp Inc (NYSE:YELP), Yahoo! Inc. (NASDAQ:YHOO) and LinkedIn Corp (NYSE:LNKD) blamed the rapid shift to programmatic advertising for their poor display ad revenues during the latest quarter.
Facebook is trying to make its ad platform more attractive for marketers, though the company has not been as badly impacted by the trend like many other companies due to its huge user base.
IBM-Twitter
IBM signed a deal with Twitter Inc (NYSE: TWTR) in March that will see Twitter build the industry’s first cloud data service that businesses can use to mine valuable insights from Twitter data. Twitter will incorporate IBM’s business analytics to help businesses filter useful data from the noise on Twitter’s platform.
Enterprises will be able to use the cloud platform to create custom social-data enable apps as well as merge their predictive tools with Twitter data to help them analyze the data. About 4,000 IBM professionals now have access to Twitter data and will enrich the data using IBM analytics to make it more useful to businesses.
Enterprises using Twitter’s platform will now gain valuable insights regarding what people are saying about their brands.
IBM-U.S. Army
IBM has gone a step further than its cloud competitors and has layered its business analytics on top of its cloud to make it more meaningful to companies. This helped the company win a cloud deal from the logistics arm of the U.S. Army in April.
IBM has been building a hybrid cloud for the Army since 2012, but added business analytics to the original deal this year. IBM says that the cloud it has built for the Army processes more than 40 million transactions a day. The Army is looking to use the cloud to achieve 50% cost savings.
IBM-The Weather Company
One of the most compelling pieces of evidence that organizations are increasingly recognizing IBM’s expertise in business analytics is the recent announcement that The Weather Company shifted the vast majority of its workloads from Amazon.com, Inc.’s (NASDAQ:AMZN) AWS to IBM’s cloud due to the inability of AWS to provide deep analytics that the company requires.
The Weather Company, which is owned by a consortium that includes Comcast Corporation (NASDAQ:CMCSA) subsidary NBCUniversal and the Blackstone Group LP (NYSE:BX), uses a highly intense predictive platform to collect data from 100,000 weather sensors, buildings, vehicles and aircraft around the world.
The effort results in 2.2 billion unique forecast points that the company uses to churn out more than 10 billion weather forecasts on active weather days.
Bottom Line
IBM’s business analytics segment seems to be firing on all cylinders. IBM’s core business and IBM stock might be faltering, but its business analytics segment is shining.
With so many significant plays in this field, there is a possibility that the company might eventually be able to pull out of its revenue tailspin and return IBM stock to investors’ good books.
As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.
