IBMLast week, IBM (IBM) announced its Intelligent Operations Center for Smarter Cities, aimed at providing in one easy package a software platform for cities to implement which will help monitor and manage city resources. We believe this could help boost IBM's middleware business, which accounts for just under half of our $185 Trefis price estimate for IBM's stock -- which is just about 15% above the current market price. IBM competes with firms like Oracle (ORCL) and Red Hat in the middleware market.

Bundled Software Allows Easier Deployment

The Intelligent Operations Center can monitor data from a number of business applications and real-time sensors such as video feeds or street sensors used by police, transit authorities and city officials to yield key performance measures that can provide insights for better resource management.

In an attempt to cut down the costs of consulting and integration required to set up the various systems, data sources and sensors that are currently established in most large cities, IBM bundles a range of software items like databases, application servers, data integration software and data management software as well as business intelligence and real-time monitoring applications into a comprehensive package.

By bringing everything together, IBM aims to make these technologies more affordable and easier to deploy for cities, especially as many states and cities are struggling with budget constraints.

We believe this could provide a boost to IBM's sales as the easy deployment helps it overcome what has been one of the biggest concerns of large packages like ones designed for cities.

As such, if IBM's middleware license revenues grow to $12 billion by the end of the Trefis forecast period instead of current forecast of growth to $10 billion, this adds just under 10% to our $185 Trefis price estimate for IBM implying a potential total return of just under 25%.

IBM will also offer repeatable "solutions" for common urban challenges (loosely similar to apps on mobile platforms) in the future. The first three solutions, which will be released during the next year or two, will focus on public safety, water management, and transportation monitoring.

See our full analysis of IBM.

Trefis is an online investment research platform targeted towards individual and professional investors. Trefis also includes a community of users that can create and share their models and analysis on trefis.com.


Like our charts?
Embed them in your own posts using the Trefis Wordpress Plugin.






Increase your money and finance knowledge from home

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Add a Comment

*0 / 3000 Character Maximum

5 Comments

Filter by:
Steve

If IBM is so smart, then why did they pull out of the small village of Endicott, New York, where the company started, and left empty manufacturing and engineering buildings to rot. The village government was more than fair with them, the people were loyal and true blue to big blue, and instead of planning ahead, they just downsized the hell out of the company and picked up stakes, leaving Endicott with empty buildings. So how can they come up with software to help cities, when they could not take care of their own business. With all the buildings they left behind, only shows that IBM could not "Plan their work and work their plan". Give me a break!!!!!!!!!!

June 16 2011 at 2:16 AM Report abuse +1 rate up rate down Reply
rdins4

IBM is just a great company all around. One of the few companies that completely changed and reinvented themselves into one of the top tech companies in the world.

June 15 2011 at 8:51 PM Report abuse rate up rate down Reply
nomorebarry7

Boink Boink !

June 15 2011 at 4:56 PM Report abuse rate up rate down Reply
nomorebarry7

Boink !

June 15 2011 at 4:52 PM Report abuse rate up rate down Reply
johnguthrieyates

But they continue to make it overseas so they are also helping us to make the cities poorer. Where is the outrage ?

June 15 2011 at 12:53 PM Report abuse +1 rate up rate down Reply