IBM Explores Sale of IBM Watson Health -- Update
February 18 2021 - 7:51PM
Dow Jones News
By Laura Cooper and Cara Lombardo
International Business Machines Corp. is exploring a potential
sale of its IBM Watson Health business, according to people
familiar with the matter, as the technology giant's new chief
executive moves to streamline the company and become more
competitive in cloud computing.
IBM is studying alternatives for the unit that could include a
sale to a private-equity firm or industry player or a merger with a
blank-check company, the people said. The unit, which employs
artificial intelligence to help hospitals, insurers and drugmakers
manage their data, has roughly $1 billion in annual revenue and
isn't currently profitable, the people said.
Its brands include Merge Healthcare, which analyzes mammograms
and MRIs; Phytel, which assists with patient communications; and
Truven Health Analytics, which analyzes complex healthcare
data.
It isn't clear how much the business might fetch in a sale, and
there may not be one.
IBM, with a market value of $108 billion, has been left behind
as cloud-computing rivals Microsoft Corp. and Amazon.com Inc. soar
to valuations more than 10 times greater. The Armonk, N.Y., company
has said it's focused on boosting its hybrid-cloud operations while
exiting some unrelated businesses.
IBM last year signaled its new focus with the appointment of
Arvind Krishna, who had run the company's cloud and
cognitive-software division, to succeed longtime CEO Ginni
Rometty.
In October, IBM said it planned to separate a major part of its
information-technology services operations, which will be the
company's biggest-ever business exit. The unit manages clients' IT
infrastructure and accounts for nearly a quarter of IBM's sales and
staff.
Watson was one of IBM's highest-profile initiatives in recent
years and a big bet on the growing healthcare sector, though
results disappointed in part because physicians were hesitant to
adopt artificial intelligence.
The company spent billions buying up a collection of
health-related businesses that are now part of IBM Watson Health,
with the aim of combining them into a vast store of patient data
and applying algorithms to extract useful insights.
IBM paid around $2.6 billion for Truven in 2016, almost $1
billion for Merge Healthcare in 2015 and around $230 million for
Phytel, according to FactSet. Price tags for other acquisitions
weren't disclosed.
While the effort made strides in areas including oncology and
genomics, it never became the cohesive business IBM envisioned and
has lost key executives in recent years.
When it appointed Mr. Krishna CEO, IBM also named Jim Whitehurst
-- CEO of Red Hat, the open-source software company IBM acquired
for about $33 billion in 2019 -- as its president, the first time
in decades it has given an executive that title.
IBM saw the deal for Red Hat, the biggest in its history, as an
opportunity to gain on competitors in cloud computing. It has said
it is aiming for sustainable single-digit revenue growth after the
planned spinoff of its managed-infrastructure business, which
generates about $19 billion in annual revenue. IBM's sales have
fallen in more than two dozen quarters in the past decade.
Write to Laura Cooper at laura.cooper@wsj.com and Cara Lombardo
at cara.lombardo@wsj.com
(END) Dow Jones Newswires
February 18, 2021 20:36 ET (01:36 GMT)
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