Tags: IBM | Chases | Growth | Cloud | computing | International | Business

IBM Chases Growth in the Cloud

Friday, 08 Apr 2011 02:37 PM

You can be forgiven for ignoring the latest flavor of dot-com hype. After all, if you weren’t invited to the private placement bonanzas going on behind the scenes at social media juggernauts like Facebook and Twitter, what does it matter?

All true, but don’t drop the ball on cloud computing. It’s no fuzzy concept. If you have ever used web-based email such as Hotmail or AOL, you relied on the “cloud.” That is, your computing got done by a distant server, not the machine on your desk.

Now imagine that process blowing up to the enterprise level. That’s what cloud is all about, and it’s likely to make new winners and new losers in the big tech space.

International Business Machines (IBM) is going heavy into the cloud, projecting $7 billion in new revenue by 2015. CEO Sam Palmisano told investors in a recent address that the cloud was one of four major strategies: Growth markets in emerging countries; analytics to parse the enormous amount of data generated now; cloud computing, and “smarter planet,” which combine these ideas into problem-solving products.

Adding $7 billion in revenue to $100 billion is not small change. The question, though, is whether IBM can build this business without simply cannibalizing its current data center business and capitalize on emerging market growth as it expects. And it faces competition.

Verizon Communications (VZ) just bought cloud provider Terremark (TMRK), taking it off the Nasdaq. Meanwhile, Dell (DELL) is ramping up its cloud business, projecting $1 billion in new spending over two years to open 10 data centers and expand customer support. Dell will deploy Microsoft’s (MSFT) Azure software in its new services offering in a bid to grow beyond from its traditional PC and server hardware business.

They’re all after faster, cheaper, better, particularly as the world grows, even if the United States and Europe lag for a while. Gartner recently forecast global IT spending to hit $3.6 trillion in 2011, a slight increase from its previous numbers. “The recent events around the world, the political unrest in the Middle East and the natural disasters in Japan, have not really impacted the forecast at this stage,” says Richard Gordon, research vice president at Gartner.

Sanford Bernstein analyst Toni Sacconaghi is less hopeful for Big Blue, downgrading the stock to market perform from outperform on doubts that it can sustain growth in revenue and earnings. Sacconaghi nevertheless called the stock a good long-term buy.

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You can be forgiven for ignoring the latest flavor of dot-com hype. After all, if you weren t invited to the private placement bonanzas going on behind the scenes at social media juggernauts like Facebook and Twitter, what does it matter? All true, but don t drop the ball...
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2011-37-08
Friday, 08 Apr 2011 02:37 PM
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