(IBM) International Business Machine Supports Bank Austria

International Business Machines Corp (IBM) has entered in to a five-year services contract with Bank Austria in a bid to strengthen the latter’s infrastructure and provide support for its incremental business. Bank Austria is a member of UniCredit Group.

IBM is already the bank’s hardware solutions provider and the new five-year contract will enable Bank Austria to be more competent and responsive to the infrastructural and customer needs. IBM’s IT support and application services will be consolidating the banking operations and various processes within the bank, thereby making it more customer-oriented. With all the support and services from IBM, Bank Austria expects to gain traction in the financial space.

Apart from the agreement with Bank Austria, IBM intends to establish the first Austrian Banking Solutions Center in Vienna and is set to be operational from this month. IBM has established similar Banking Solutions Centers in countries such as Germany and Switzerland.

The Banking Solutions Center will not only provide services to Bank Austria, but also be providing services to other financial institutions in the country relating to software development, application management, database management and data center management. Thus, it will also help the institutions to be aware of the new Basel III and deposit insurance or national bank taxation rules and regulatory needs.

In Austria, IBM has a financial solutions center for the insurance sector, where IBM provides services to other clients including the Vienna Insurance Group, one of the largest insurance companies in Austria.

In this ever-changing IT services domain, clients are on the look out for more precise and custom made services. IBM as an IT solutions provider is not just helping its clients to be cost effective, but also leveraging its world class and industry-tested solutions and services to fuel business growth, solve business problems and identify growth opportunities.

We believe that the partnership will significantly benefit IBM, as it will gain traction in the Austrian financial market. We expect further wins such as this one, as financial institutions are increasingly focusing on core competencies and customer needs.

Recommendation

We believe that IBM will continue to benefit from its spate of new initiatives like smarter planet, business analytics and optimization, and cloud computing over the long term.

However, IBM continues to face stiff competition from a number of companies, including Hewlett Packard Co. (HPQ), Microsoft Corp. (MSFT), Oracle Corp. (ORCL) and EMC Corp. (EMC).

We remain Neutral over the long term (6-12 months) based on the belief that the company’s shares are fairly valued at current levels.

Currently, IBM has a Zacks #3 Rank, which implies a short-term Hold rating.

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