International Business Machines Corp. (IBM) And SAP SE (ADR) (SAP) Unite Forces To Withstand Competition

A relatively young branch of technology, cloud computing is gaining muscle as more and more companies find it to be a particularly useful tool in data storage and manipulation. In 2008 the first open-source platforms for deploying private clouds were brought by Amazon.com, Inc. (NASDAQ:AMZN)’s AWS and OpenNebula, a European Commission-funded project. Now, as practically every big tech company has its own clouds it might be time to consolidate powers. Bloomberg announced that International Business Machines Corp. (NYSE:IBM) and SAP SE (ADR) (NYSE:SAP) are partnering in cloud computing to beef up revenues.

“They [IBM and SAP] agreed to a cloud computing partnership in an effort to keep pace with the new generation of competitors. IBM will let SAP use its datacenters so the German software company can deliver its Hana Enterprise Cloud database and platform to customers through the web. The move gives IBM cloud revenue as demand for hardware slows down,” said Scarlet Fu.

International Business Machines Corp. (NYSE:IBM), at its $183.8 price, is down some 2% year to date and, as mentioned above, the diminishing revenues coming from hardware have the largest impact. $3.3 billion is what International Business Machines Corp. (NYSE:IBM) got for its tangible products in the second quarter and this number is down some 11% year to year. On the other hand, services offered by the company have been performing much better and the mobile sector has been growing more than 100% year to date, according to second quarter report.

SAP SE (ADR) (NYSE:SAP) is even in a more complicated situation as the company’s price plunged almost 22% year to date, but its cloud revenue should have passed the €1.2 billion stated in their second quarter financial statement. SAP SE (ADR) (NYSE:SAP)’s adjusted cloud billings increased 37% year by year comparison and seems that it established itself as a leader in cloud computing.

So having the above details in mind it’s not difficult to imagine why International Business Machines Corp. (NYSE:IBM) decided to pursue a partnership with SAP SE (ADR) (NYSE:SAP), however the most important question is what these two will bring to the consumers and how will that allow them bypass competition.

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