Landing deals with a big-name corporation is always a win for a small-cap. But expanding upon an existing deal is even better!
Not only does it prove the initial tie-up was fruitful, but that there is more room for growth. And that is exactly what Straker Translations Ltd [ASX:STG] has done today.
Their latest announcement to expand their partnership with IBM was very well received. Sending the small New Zealand company’s share price 71.27% higher at time of writing. Breaking price levels that investors haven’t seen since late 2019…
So, let’s dig into the reasons behind this monumental gain.
Doubling down with a multitude of dialects
Straker, as their name suggests, provides translation solutions. Using a mix of AI, machine learning, and freelance translators to build a ‘hybrid translation platform’.
In simple terms, they offer a service that can accurately translate language on demand. One that is designed to be implemented in business or organisational operations.
Because of this, IBM decided to partner up with Straker. Initially agreeing to work as a ‘Strategic Translation Service Provider’, but only for Spanish.
It was a small start, but it was what Straker needed to get their foot in the door.
Now, as of today’s announcement, Straker’s services will be expanded to 55 languages under this IBM partnership. Working closely with their media localisation efforts across the world. Although, this is likely to be just the tip of the iceberg for both companies’ much broader vision for AI.
As Straker CEO Grant Straker put it:
‘We are thrilled to have secured this strategic agreement with IBM, and further build our existing relationship with a world leader in data management, software, artificial intelligence and cognitive computing.
‘Our industry, like almost every other, is being fundamentally changed by the accelerating use of AI across all facets of localisation. The agreement requires extensive integration with IBM and the opportunity to build a deep partnership with the world’s leading AI company is hugely exciting.
‘We expect it will open up new opportunities for us to partner on innovation within our industry.’
For investors it will be extremely exciting to see where these opportunities may lead. Because as today’s market response has shown, expectations are now sky high.
What’s next for Straker?
Crucially, Straker admitted that they can’t give a firm number in terms of this deal. With no commitment from IBM in terms of potential revenue or sales, if any.
Rather, it is simply an opportunity to work with the tech giant and potentially become a part of their value chain. Something that could yield a lot of sales growth, or none whatsoever.
It is hard to imagine Straker will walk away from this totally empty handed though. The fact that IBM is doubling down on the partnership is a strong sign that Straker’s tech must have some value.
With a two-year agreement in place, and an option for two more years on top of that, they certainly have time anyway.
So, shareholders will have plenty of opportunity to see how this deal plays out. As I said though, the market has set some lofty expectations with today’s trading movement.
For Money Morning
PS: Straker isn’t the only AI-related stock on the ASX. There are a handful of small, but promising, companies to be found. Check out our report on some of the more exciting ones, right here.