IBM’s Apptio deal adds cloud, IT spend optimization assets, says Credit Suisse

Commenting on IBM‘s announced acquisition of Apptio for $4.6B, Credit Suisse analyst Shannon Cross notes that the latter has collected anonymized data on $450B of IT spending across its customer base which the firm’s expect IBM to contribute to its foundational AI models, integrate into existing products and utilize for better insights within its Consulting business. Apptio’s tools are offered on a subscription basis and Credit Suisse estimates Apptio will add around $600M of software revenue, which would imply an 8-times revenue multiple for valuation. Further, the firm believes the transaction is timely given the amount of data Apptio is bringing with it and increased attention to optimization of cloud spend. Credit Suisse has an Outperform rating on IBM’s shares with a price target of $162.