IBM ‘Considering Sale’ Of Watson Health AI Unit

IBM is reportedly considering selling off its Watson Health business as part of a streamlining plan, according to multiple media outlets citing unnamed sources.

The company may sell the division to a private equity firm, another firm in the industry or a blank-cheque company, the Wall Street Journal reported.

A blank-cheque company is one at an early stage of development whose business plan is often to engage in a merger or acquisition.

Watson Health has annual revenues of about $1 billion (£720m) and is not profitable, the WSJ said, citing unnamed people familiar with the matter.

Healthcare analytics

The division, which uses artificial intelligence to manage healthcare data and derive useful insights from it, was one of IBM’s highest-profile ventures under previous chief executive Ginny Rometty.

It has been bolstered in recent years by billions of dollars in acqusitions, including Merge Healthcare, which analyses mammograms and MRIs, Phytel, which works with patient communications, and Truven Health Analytics, which analyses complex healthcare data, but critics said the brands never came together into a cohesive whole.

The unit’s revenue growth has also been sluggish, reportedly in part due to physicians’ reluctance to adopt artificial intelligence. It has lost key executives in recent years and IBM laid off staff in 2020.

IBM has been looking to refocus on areas with higher profitability, such as cloud computing, and as part of that plan last year appointed as its new chief executive Arvind Krishna, formerly head of its cloud and cognitive software division.

In October, IBM said it would spin off its managed information technology services division into a separate, publicly traded company, in its biggest-ever business exit, as part of the strategy.

Cloud shift

The managed IT services unit, which accounts for about one-quarter of IBM’s sales and staff, has seen its business affected by companies’ shift to cloud computing, which has benefited rivals such as Microsoft and Amazon.

Te spinoff is scheduled to be completed by 2021.

IBM’s acquisition of Red Hat for about $34bn in 2018 was a key part of its cloud strategy, and it appointed Red Hat chief executive Jim Whitehurst as corporate president, the first time in decades it has given an executive the title.

Following the spinoff of its managed infrastructure business IBM has said it is aiming for sustainable single-digit revenue growth, following more than two dozen quarters of falling sales over the past decade.