IBM is reportedly mulling a sale of its Watson Health business unit, according to multiple media reports. Big Blue is said to be considering the sale as part of CEO Arvind Krishna’s plan to focus on higher-margin businesses like AI and cloud.
In IBM’s fourth quarter, cognitive applications revenue, which includes Watson Health, came to $1.5 billion, a decrease of 2% year over year.
Last October, IBM announced plans to spin off its managed infrastructure services unit into a new public company — another move by the IBM to focus on its hybrid cloud business, which includes Red Hat. When the managed infrastructure company is spun off, IBM will transition from being a company with half its revenue in services to one with more than 50% of sales from recurring revenue.
IBM Watson was one of IBM’s “strategic imperatives” under former CEO Ginni Rometty, despite its sluggish growth numbers and reports that the system was costly and hard for customers to implement.
When IBM launched its Watson Health unit the goal was to expand into personalized medicine via DNA translation and the input of electronic health records. But Watson stumbled in the healthcare sector, the Wall Street Journal writes, “in part because physicians were hesitant to adopt artificial intelligence”. In 2018, IBM laid off a percentage of its Watson Health workforce.
In terms of the potential sale, the WSJ suggests that IBM is considering “a sale to a private-equity firm or industry player or a merger with a blank-check company”.