CEO Ginni Rometty is clear on the direction she intends to lead IBM (NYSE:IBM). Long associated with hardware and related offerings, IBM has struggled to transition to new, fast-growing markets including the cloud, big data, cognitive computing, and the Internet of Things (IoT). Collectively, Rometty refers to IBM's transitional efforts as "strategic imperatives," and its future relies on successfully growing within these new markets.
In addition to multiple acquisitions, IBM has aggressively pursued industry partnerships to expand its offerings, and recently announced its latest in a long line of alliances. Enterprise storage, computer, and components provider Avnet (NYSE:AVT) recently announced it has come to an agreement with IBM to offer its clients IoT solutions built upon IBM's "Watson IoT Platform." Watson is IBM's cognitive computing wonder, and is a key component in several of its cloud, big data, and IoT suite of solutions.
Does it matter?
At approximately $5.5 billion in market capitalization, Avnet doesn't offer IBM the size and scope of some of its other IoT partners. However, the deal with Avnet does reinforce IBM's emphasis in expanding its IoT initiatives, the success of which, along with its other strategic imperatives, are crucial to regaining investor confidence.
Thanks to a nice stock price run of late -- IBM shares were sitting at $117.85 on Feb. 11 -- its year-to-date performance has been relatively flat. The first step in changing investor's blasé attitude is reaching Rometty's goal of generating 40% of IBM's total revenue from its strategic imperatives units by 2018. As it stands, IBM reported a 26% jump in its strategic unit's revenue to $28.9 billion: good for 35% of 2015's $81.7 billion total. Rometty's goal looks like a slam dunk, and the Avnet deal certainly won't hurt.