STT State Street Corporation

Broadridge Financial Solutions Inc. (BR) recently completed the acquisition of all the intellectual property (IP) rights of a financial service processing solution of Mitsui Knowledge Industry Co Ltd. (“MKI”). Financial details of the transaction were not disclosed.

Headquartered in Tokyo, Mitsui Knowledge offers various services related to information technology network integration in Japan. Under the software purchase agreement, Broadridge obtained the IP rights of MKI’s B-Fund solution. This solution is customized to facilitate clearance and settlement transactions related to Japanese government bonds and yen payments on Bank of Japan’s BOJ-Net System.

Under Broadridge’s umbrella, the B-Fund solution will be renamed Gloss BOJ Processing Solution. The solution will enable Broadridge to offer an advanced clearing and settlement solution for equities, fixed income and related instruments to the Bank of Japan. Apart from the Bank of Japan, Broadridge will license the solution back to MKI, to help the former serve its existing clients.

Broadridge also intends to offer various other financial solutions to the Japanese market. With local players teetering from the impact of the tsunami and earthquake, there may be other opportunities to pick up other important assets. Broadridge will no doubt capitalize on this opportunity to drive future growth in the region.

Overall, we remain optimistic on Broadridge’s strategic acquisitions and potential product launches. However, the company has not done well in its recently concluded second quarter.

We believe that weaker market activity during the recession continues to impact the company’s performance, which was the reason for its dull fiscal 2011 guidance. Moreover, continued softness at the mutual fund clients also affected the fiscal year guidance.

Additionally, Broadridge faces significant competition from companies such as HD Supply, DST Systems Inc. (DST) and State Street Corp. (STT), which have increased pricing pressure for the company.

Despite Broadridge’s efforts to beef up its portfolio and expand overseas, we do not see any improvement in investor sentiment until market activity picks up significantly.

Currently, Broadridge has a Zacks #5 Rank, implying a short-term Strong Sell recommendation.

 
BROADRIDGE FINL (BR): Free Stock Analysis Report
 
DST SYSTEMS (DST): Free Stock Analysis Report
 
STATE ST CORP (STT): Free Stock Analysis Report
 
Zacks Investment Research