IBM global outsourcing revenues rise

12/09/05 - newratings.com

NEW YORK, December 9 (newratings.com) – Market research firm IDC Corp Thursday reported that IBM's (IBM) global outsourcing revenues grew 11% y/y to $13.1 billion in 2004.

According to IDC, IBM's outsourcing revenues in the US were $6.5 billion, representing 10% y/y growth. The computer giant's outsourcing market share was 15.5% globally and 19.2% in the US during 2004, IDC said. IBM retained its number-one position in the outsourcing market during 2004. The other outsourcing giants, Electronic Data Systems (EDS) and Computer Sciences Corporation (CSC), did not witness significant growth during 2004, IDC added. IDC also said that new entrants into the outsourcing market, including Dell (DELL), are challenging giants such as IBM, through their low prices, specialized expertise and advanced technology. According to IDC, the global market for outsourcing services has reached $84.6 billion.

Analysts at UBS have downgraded IBM from "buy" to "neutral." The target price is set to $100. In a research note published this morning, the analysts mentioned that the downgrade in the rating is based on valuation. IBM's growth during 2006 is expected to be driven by the company's robust hardware sales and restructuring efforts, the analysts said. The analysts believe, however, that negative currency effects and pension costs would hurt the company's results during 2006. IBM's 4Q05 performance would be driven by healthy sales of the company's mainframe computers, UBS added.