Monetise Plc (LON:MONI) and International Business Machines Corp. (NYSE:IBM) announced an expanded global partnership a little over a month ago. This morning, they revealed that their relationship is deepening further, and Lee Cooperman is likely a happy man as a result of that. As a result, now analysts and some investors are questioning whether IBM will eventually buy out Monetise. In a blog post dated Aug. 27, 2014, BTIG analyst Mark Palmer suggests that an IBM takeover could happen slowly. Palmer thinks any investor who is selling Monetise shares short should reconsider whether that’s a good idea (so far, Coatue, and other Tiger Cubs are taking that bet).

IBM Monetise
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More on the IBM – Monetise deal

The deal between IBM and Monetise is to provide cloud-based mobile commerce services to financial institutions. Today’s announcement from the two companies outlined plans to enhance their sales, technology and marketing partnership. Under the further expanded relationship, IBM’s specialist and sales resources will be jointly pitching Monetise’s Mobile Money offerings.

Palmer believes that IBM’s sales of the company’s products could be a “game changer.” He notes that Monetise’s shares have been weak over the last few months, mostly because investors worried about whether the company’s subscription model will gain some traction. Monetise bases its subscription model on sharing average revenue per user on the back end. Its previous model was based on upfront IT spending from enterprise customers. The company made the change to the new model in March.

A “creeping takeover” of Monetise?

Palmer thinks investors are starting to speculate about whether IBM will slowly take over Monetise in a “creeping” fashion.” Company management pointed out that Monetise gains a significant advantage through the sales relationship with IBM because of its joint pitch with the much-larger company.

At first, the two companies will focus on banks, but over time, they will move into targeting operators of mobile networks and other verticals that require an application programming interface to be connected to mobile payment content and functionality.

Some Monetise teams already transfering to IBM

Apparently there is already a big sign that IBM might take over Monetise, as it is transferring some of its teams over to IBM. The affected teams include its Professional Services division, which makes up about 20% of the company’s global workforce. Those teams will move to IBM in December. Palmer believes this “unusual” transfer of employees just reinforces the idea that IBM may be seriously considering a buyout of all of Monetise gradually.

The only details provided by Monetise management regarding the financial impact of the enhanced relationship with IBM include the expectation that it will contribute to its 25% revenue growth target for the 2015 fiscal year. The company also said the relationship will support its goal of 30% or greater EBITDA margins by the 2018 fiscal year.