Will IBM Just Crowd the Internet of Things Space?

As the Internet of Things (IoT) continues to grow, and more devices connect more people and information across the globe, many key technology companies have to find a way to profit from this or be left in the dust. International Business Machines Corp. (NYSE: IBM) is jumping on the Internet of Things train, after it was one of the worst-run companies in 2014. Hopefully, this can pull IBM out of its slump, as the stock is down about 12% from this time last year.

Big Blue announced Tuesday morning that it will invest $3 billion over the next four years to establish a new IoT unit. What this entails is building a cloud-based open platform designed to help clients and ecosystem partners build IoT solutions. As far as what this means to the greater good of IBM, its market cap is just over $160 billion.

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IBM is taking a relatively aggressive stance on the IoT, as it believes that 90% of all data generated by IoT devices is never analyzed or acted on. In fact, the company believes that as much as 60% of this data loses its value within milliseconds of being generated. As a result Big Blue is addressing this through:

  • IBM IoT Cloud Open Platform for Industries will provide new analytics services that clients, partners and IBM will use to design and deliver vertical industry IoT solutions. For example, IBM will introduce a cloud-based service that helps insurance companies extract insight from connected vehicles. This will enable new, more dynamic pricing models and the delivery of services that can be highly customized to individual drivers.
  • IBM Bluemix IoT Zone will enable developers to easily integrate IoT data into cloud-based development and deployment of IoT apps. Developers will be able to enrich existing business applications by infusing more real-time data and embedded analytics to further automate and optimize mission-critical IoT processes.
  • IBM IoT Ecosystem will expand through its other IoT partners from silicon and device manufacturers to industry-oriented solution providers, with the prospect of ensuring the secure and seamless integration of data services and solutions on IBM’s open platform.

Bob Picciano, Senior Vice President of IBM Analytics, said:

Our knowledge of the world grows with every connected sensor and device, but too often we are not acting on it, even when we know we can ensure a better result. IBM will enable clients and industry partners apply IoT data to build solutions based on an open platform. This is a major focus of investment for IBM because it’s a rich and broad-based opportunity where innovation matters.

Now, IBM might be late to the dance in terms getting to market in IoT, but it does have a broad cloud platform that will make this a natural expansion for Big Blue. While other companies are looking to fill the IoT space with devices, IBM has chosen a different route, which could have a broader appeal across this space. As more and more devices come out in the IoT, someone will have to analyze the data, and that someone could very well be IBM.

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Now the one trick remaining is that IBM has to actually succeed. Merrill Lynch has previously highlighted four Internet of Things picks for 2015. IBM was not one of them.

Shares of IBM were relatively flat at $162.20 in Tuesday’s premarket trading. The stock has a consensus analyst price target of $158.63 and a 52-week trading range of $149.52 to $199.21.

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