IBM Seeks Buyer for Watson Health Unit: Report

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In the latest move by International Business Machines CEO Arvind Krishna to reposition the tech giant by streamlining and restarting growth, Big Blue has hired BofA Securities to find a buyer for its Watson Health artificial-intelligence-software business according to a report.

IBM

‘s looking for a price of more than $1 billion.

According to Axios, which cites “people familiar with the situation,” IBM (ticker: IBM) wants to exit its health-care vertical market, after spending more than $4 billion on a series of acquisitions to build the unit. Watson Health emerged from the company’s push into artificial-intelligence software a decade ago, but the business never met expectations. IBM paid $2.6 billion for Truven Health Analytics in 2016, paid close to $1 billion for Merge Healthcare, a medical-imaging business, in 2015, and paid around $230 million for Phytel, which focuses on population health.

IBM declined to comment.

In an interview with Barron’s late last year, Krishna concedes that Watson didn’t provide the expected payout for IBM, although he’s hardly gave up on the broader promise of AI. “Coming out and saying it’s going to be its own unique application was perhaps a bridge too far,” he says. “I actually believe we’ll get there, but it’s probably another decade.” Krishna sees opportunity for AI across many applications, citing call centers and managing insurance claims, among others.

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Almost a year ago, The Wall Street Journal reported that IBM was exploring a sale of the unit, noting that it has about $1 billion in annual revenue and isn’t profitable.

Axios reports that bids for the business were due yesterday, and that the company hopes to pick a winner by the end of January. According to the report, one strategic buyer and several private-equity firms are “in the mix.”

While selling Watson Health would be have a big impact on the business, it continues the company’s focus on streamlining operations, a process highlighted by the spinoff its managed-services business, now called

Kyndryl Holdings

(

KD

).

Evercore ISI analyst Amit Daryanani writes in a research note Wednesday that “while the financial implication from this is likely minimal, the strategic relevance of IBM consolidating their focus around the multi/hybrid cloud narrative and reducing the noise in their portfolio would be a positive.”

Write to Eric J. Savitz at [email protected]