IBM (NYSE:IBM) recently signed a new $300 million, 10-year IT "infrastructure as a service" (IaaS) agreement with Dubai's Emirates Airline. The deal will help the world's fourth-largest carrier of international passengers encrypt its data in near real-time and improve the efficiency of its passenger support systems. The new platform will also enable Emirates to build its own apps using IBM's APIs.
This is notably the second major deal IBM has recently made with a Dubai-based airline. Last October, it signed a more expansive 10-year deal with Etihad Airlines for its cloud, mobile, security, analytics, and cognitive computing services worth $700 million.
How does this help IBM?
The new partnership with Emirates could strengthen IBM's Technology Services and Cloud division, which posted a 1.5% annual sales decline last quarter due to sluggish enterprise spending, intense competition, and currency impacts. The expansion of its IaaS efforts can also help IBM's Bluemix compete more effectively against cloud platform leaders like Amazon's (NASDAQ:AMZN) AWS and Microsoft's (NASDAQ:MSFT) Azure.
Letting Emirates create its own apps complements Big Blue's partnership with Apple, which put IBM's cloud-based apps on iOS devices. That partnership helped Apple expand its enterprise footprint and IBM gain more cloud customers. The new deal gives Emirates a more efficient way to create cloud-based apps, and IBM tethers more data to its analytics business.
Higher sales of z System mainframes and data storage devices, which will both be used in the partnership, could strengthen the Systems division, where sales plummeted 21.8% last quarter due to lower demand for enterprise hardware. IBM has struggled against Intel in the data center market, but it's carved out a niche with its high-end z System mainframes.
But will the deal move the needle?
IBM's partnerships with Emirates and Etihad are encouraging, but the company will need a lot more partnerships to keep pace with Amazon and Microsoft in the ongoing cloud platform wars. These partnerships also probably won't help IBM reverse its 16 straight quarters of sales declines -- which is the crucial figure which most investors are watching for hints of a turnaround.
Leo Sun owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com and Apple. The Motley Fool owns shares of Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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