IBM Stock: International Business Machines Corp.’s Big Bet

IBM Stock
Photo: Ethan Miller / Staff / Getty Images

Where IBM Stock Is Headed Next

While most companies started packing their bags after Britain voted to leave the European Union (EU), International Business Machines Corp. (NYSE:IBM) decided to double down.

The giant IT vendor is going to build four new data centers on the island, a riskless bet that could pay off big-time for IBM stock. There is a growing appetite for cloud services, both in the corporate and personal markets, and IBM wants to press its advantage while land is cheap in the U.K. (Source: “IBM Will Triple the Number of Cloud Data Centers It Has in Britain,” Fortune, November 22, 2016.)

“U.K. customers truly understand the capabilities of cloud to drive innovation, to be more flexible on their business model, to have better insight for decision making, and to deliver better customer service,” said IBM Europe’s general manager for cloud services, Sebastian Krause, to Fortune.

Britain’s economy is much bigger than its physical presence would suggest, which is why IBM thinks there is money to be made on its shores. The company already has two data centers there, and it had planned this expansion well in advance of Brexit.

Advertisement

When asked what impact Brexit had on IBM’s thinking, Krause said the company saw no reason to scale back its ambitions. “Everyone has concluded the U.K. economy will continue to be very strong and there will be significant opportunities with or without Brexit,” he said.

As one of the leading IT vendors in the world, IBM has working relationships with hundreds of companies around the world. Many of these companies want to migrate their workbooks to the cloud, but some still want to house servers on their premises.

Companies have proprietary data that could be devastating if leaked, which is perceived as more likely on a public cloud. Whether those security concerns are valid, they are certain to impact businesses’ choice of cloud provider.

IBM has an edge in this corner of the market, alongside Microsoft Corporation (NASDAQ:MSFT), because the company has invested heavily into a mix of public and private servers. The addition of four giant data centers should bolster IBM’s competitiveness in Britain, particularly as Alphabet Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) rush to catch up in private cloud offerings.

These competitive advantages will likely play out in the medium-to-long term for IBM stock. But, in the meantime, the company can benefit from the U.K.’s wealth of talent. The country has phenomenal universities which position their graduates at the leading edge of technology and innovation.