International Business Machines Corp. (NYSE: IBM) announced a small acquisition of Merge Healthcare (NASDAQ: MRGE) this week. The firm Janney Capital Markets sees this close to the way 24/7 Wall St. sees it. The firm kept its Neutral rating on IBM.

Joseph D. Foresi, Janney’s analyst covering IBM sees IBM as still fishing in the healthcare pond. While he was not negative on the view, a Neutral rating just doesn’t muster up great ambition.

Foresi’s flash takeaway said:

We maintain our Neutral on IBM, viewing a return to growth as necessary for multiple expansion. Investors are getting closer to the bottom (where we can see a positive turn in numbers) with each passing quarter, but the timing of reaching the bottom remains uncertain (maybe end of 2015). IBM continues its foray into the Healthcare vertical (fastest growing IT spending vertical) with the announcement of its acquisition of Merge Healthcare.

Merge was said to be the third major healthcare-related acquisition that IBM has made since April, back when it launched its Watson Health product. The two prior deals were Phytel (focusing on population health) and Explorys (provides cloud based healthcare intelligence).

Merge develops medical imaging and information management software, and it appears that IBM thinks Merge’s current clients could use the Watson Health Cloud with data and images obtained from Merge’s medical imaging management platform.

As far as why 24/7 Wall St. sees this as an inconsequential deal, the valuations multiples were laid out by Janney as follows:

Valuation at about 3.1x Merge’s revenues (18% estimated revenue growth in 2015) and 30 times projected 2015 earnings. This is against IBM valued at about 1.8 times revenues and 10 times 2015 projected earnings.

Foresi concludes on IBM:

Merge acquisition is primarily strategically significant. For Fiscal 2015, we continue to look for non-GAAP EPS of $15.87, and revenue of $83 billion, on an operating margin of 22.7%. Our Fair Value remains $160 (for IBM stock), based on 10 times our 2015 EPS estimate. Merge is a small acquisition generating about $250 million in revenues and $23 million in earnings annually.

Not much to  consider for any big impact.

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