Sanchez Computer Associates Inc., which has been a Wall Street darling, has entered into a technology agreement with International Business Machines Corp.
Sanchez's core banking software, used by Citigroup Inc., ING Group, and Bankers Trust Corp., runs on IBM RS 6000 servers, giving large banks client/server capabilities.
IBM, already a reseller of Sanchez products, will make its testing facilities available for software development by the smaller company, said Sanchez spokeswoman Jane Waltman.
Sanchez's stock has benefited from the market's Internet euphoria. On April 13, its share price rose 151%, to $79.875, after the Malvern, Pa., company demonstrated how its software can run large-scale Internet banking operations.
More recently, it announced a 2-for-1 stock split, effective June 23. The stock closed Friday at $79, up 19% for the week.
Charles Wittmann, an analyst at First Union Capital Markets, said Sanchez is undervalued even at the current 85 times next year's estimated earnings.
He said Sanchez has the only software that brings client/server advantages to big banks.
In other words, they are able to integrate real-time data processing across multiple delivery systems.
Mr. Wittmann rates the stock a "strong buy" and has a 52-week price target of $110. "These guys have great momentum. They believe they can service the largest banks globally."