(IT) International Business Machines Opens Data Centers in Japan

Information Technology (IT) major, International Business Machines Corp. (IBM) recently announced the opening of two new data centers in Japan.

The first data center is located in Makuhari and will cater to IBM’s SmartCloud Enterprise customers. The new data center will enable IBM to deliver both public and private cloud services to Japanese enterprises.

This is IBM’s sixth SmartCloud data center. The company already has data centers in Germany, Canada and the United States. In March 2011, IBM announced that it will invest $38 million to build a new Cloud Computing Data Center in Singapore to exploit the potential of cloud computing in the Asia-Pacific through its comprehensive solutions and services.

IBM has 13 global cloud labs, of which seven are based in the Asia-Pacific including China, India, Korea, Japan, Hong Kong, Vietnam and Singapore.

IBM also said that the second data center will come up in the latter half of this year and will serve LotusLive, IBM’s cloud-based collaboration services in Japan.

The new data center will enable LotusLive to offer online messaging and social collaboration services to Japanese companies, who are not allowed to take their data outside the country due to security and regulatory reasons.

The new data centers signifies the increasing demand for cloud solutions and services in the Asia-Pacific region and keeping that in mind IBM has further focused on delivering the desired service to its clients (both public and private) to cater to their infrastructural requirements.

The Asia-Pacific market for cloud computing is set to grow 40% per annum through 2014 to $4.9 billion and IBM is well positioned to take advantage of this growth by establishing regional data centers that will provide the necessary infrastructure for the growth of key cloud computing areas.

Our Take

IBM remains a heavyweight in the cloud-computing market and expects $7.0 billion in revenues by 2015. Moreover, its strong cash balance will help IBM to acquire companies with high intellectual property (IP), which will drive further growth going forward.

We believe that IBM will continue to benefit from its spate of new initiatives like smarter planet, business analytics and optimization, besides 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 #2 Rank, which implies a short-term Buy rating.

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