IBM - Strong Quarterly Results And A New CEO

Red Hat – Driving Margin Expansion and Revenue Growth:

Red Hat will accelerate IBM’s growth and reinforce its high-value model from a revenue growth standpoint and the shift to higher value. Red Hat had been growing revenue at strong double-digit rate and a similar level of backlog growth. Red Hat has high margins and great free cash flow generation. Red Hat will accelerate IBM’s top line revenue growth rate by 200 basis points on a five year CAGR. Red Hat accelerates the business shift to higher value and expands gross profit margin, and free cash flow in year one, and operating earnings per share by the end of year two.

From Red Hat perspective, their offerings can now benefit from IBM’s scale and resources to enhance the development and continued improvement of its infrastructure, management, automation solutions and cloud application development. IBM believes that this will bring revenue synergies and clearly stated that it’s not about a cost synergy case, but a revenue growth case because this acquisition is about growth.

Future Blockchain Catalyst:

A potential growth driver for future revenue growth lies in blockchain. I think IBM has a new frontier of growth in the nascent blockchain technology as the company is a first mover in this promising, emerging technology. IBM’s enterprise blockchain solutions will be a substantial growth engine for the company as more companies adopt this technology. Blockchain has the potential to penetrate the $2 trillion in global payments and $1.8 trillion global supply chain. Recently, healthcare has come into the equation as another huge addressable market. IBM has partnered with CVS Health's Aetna and other insurers on a blockchain network to cut healthcare industry costs. The companies will use the network for processing claims and payments and for maintaining a directory. Anthem, Health Care Services and PNC Bank are also involved with the project.

IBM is offering the first enterprise-grade blockchain platform for permissioned networks and is aggressively stepping into the enterprise blockchain solutions space. Any company looking to employ blockchain technology will likely leverage a company like IBM for the blockchain infrastructure as it’s a first-mover in the space and Juniper Research ranked IBM as the top blockchain company in the world with 40% of surveyed tech executives and leaders ranking IBM as their preferred blockchain service provider. IBM is well positioned as it is the #1 enterprise blockchain partner with greater than 400 projects with world renowned companies across many different sectors involving transactions such as Dow, Walmart, HSBC, Nestle and Visa.

Partners in the food industry are Nestlé, Unilever and Kroger. In global shipping, IBM is working with Maersk, Dow Chemical and DuPont. IBM’s blockchain is seeing inroads in the finance industry as well with Societe Generale, HSBC, WeTrade, Unicredit and Santander being top partners. IBM is also working with payment providers like VISA, BBVA, CIBC, EarthPort, and Polynesian payments platform KlickEx.

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Disclaimer: I am the sole author of this content. All content is original and free of plagiarism. I use reasonable care to ensure that all facts and statements within the content are true and ...

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