IBM Contemplates Selling Watson Health

IBM’s supercomputers have vanquished chess grandmasters and Jeopardy! quizmasters, but it appears they have met their match.

IBM is considering selling Watson Health, its underperforming supercomputer unit that was supposed to help doctors diagnose and cure cancer.

Can’t Spend Your Way Out of This One

In the words of former senior executive John Kelly, IBM “bet the ranch” to beef up its Watson Health unit. The company paid $1 billion for Merge Healthcare in 2015 and $2.6 billion for Truven in 2016, among several other spendy acquisitions.

The moves bolstered areas like oncology and genomics, but Watson Health never developed into an integrated business:

  • The unit struggled for market share as it’s A.I. proved better at basic administrative tasks like pulling research and billing than making critical diagnoses.
  • Watson Health has about $1 billion in annual revenue, but isn’t profitable.

Now, IBM is looking into parting ways with the unit. That could mean a sale to an industry player or private-equity firm, or even a merger with a blank-check company.

Arvind Wants A Slim Down

After a decade of declining revenues, new IBM CEO Arvind Krishna wants to focus on growth areas like cloud-computing. Shipping off Watson Health would be Krishna’s second big divestiture in less than a year as leading man.

In October, he moved to spin off the company’s managed IT services division, which generated about $19 billion of annual revenue.

the takeaway

Don’t mark your calendar for the A.I. healthcare utopia just yet. Google’s DeepMind unit, which launched initiatives focused on chronic conditions, lost $649 million in 2019 – and that’s after Google forgave more than $1 billion of loans to the unit.

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