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TheStreet Open House

IBM Buys Into Mobile Advertising and Big Data Space

NEW YORK (TheStreet) -- IBM (IBM) has acquired Xtify, a mobile messaging platform specializing in rich-content texts and push notifications. Xtify software has the ability to trigger messages depending on time or geographic location, as well as demographic data. The company was purchased for an undisclosed amount.

"Xtify's mobile messaging capability combined with IBM's analytics and cloud infrastructure will provide marketers with global reach and an arsenal of rich content," said Xtify CEO Josh Rochlin in a statement.

IBM says Xtify will support operations in its MobileFirst software and Smarter Commerce divisions, both of which  offer mobile advertising solutions to its business customers.

"The acquisition of Xtify provides new ways for our clients to foster a direct, one-to-one communication channels with their customers," said Kevin Bishop, IBM Vice President for Digital Marketing.

The acquisition comes two days after IBM announced it had purchased mobile analytics company The Now Factory, financial terms of which have not been made public. IBM said this is a step forward in its long-term strategy to monetize big data and analytics, an area of business it expects will generate $20 billion in revenue by 2015.

IBM shares dropped 0.59% to close Thursday trading at $183.86. The S&P 500 was down 0.75%.

TheStreet Ratings team rates IBM as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate IBM a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the IT Services industry and the overall market, IBM's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for IBM is rather high; currently it is at 53.83%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.94% trails the industry average.
  • IBM's earnings per share declined by 12.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, IBM increased its bottom line by earning $14.41 vs. $13.12 in the prior year. This year, the market expects an improvement in earnings ($16.90 vs. $14.41).
  • Despite the weak revenue results, IBM has outperformed against the industry average of 15.3%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IBM has underperformed the S&P 500 Index, declining 6.76% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

Business solutions company and IBM competitor Accenture (ACN) has acquired outsourcing firm Procurian for $375 million in an all-cash deal. Accenture will absorb Procurian's 780 employees into its operations. The deal is expected to be finalized by the end of the year.

Accenture shares closed 0.5% lower at $73.14.

TheStreet Ratings team rates Accenture as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate Accenture (ACN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 15.3%. Since the same quarter one year prior, revenues slightly increased by 3.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ACN's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the IT Services industry and the overall market, Accenture's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the IT Services industry average. The net income increased by 16.0% when compared to the same quarter one year prior, going from $578.28 million to $671 million.

Written by Keris Alison Lahiff.

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