IBM is reportedly considering a potential sale of its IBM Watson Health Business to streamline the company and become more competitive in cloud computing.
The business leverages artificial intelligence to help hospitals, insurers, and drug makers manage their data and generates an annual revenue of nearly $1.5 billion, but is currently not profitable, The Wall Street Journal stated this week.
The company’s potential interest in selling Watson Health, is part of a strategy by CEO Arvind Krishna to “streamline the company and become more competitive in cloud computing,” according to the Journal.
The company’s brands include Merge Healthcare, which analyzes mammograms and MRIs, Phytel, which assists with patient communications, and Truven Health Analytics, which analyzes complex healthcare data. The company paid nearly $2.6 billion for Truven in 2016, $1 billion for Merge Healthcare in 2015, and around $230 million for Phytel, according to FactSet.
The corporation is currently studying alternatives for the business that may include a sale to a private equity firm or another industry player. The company is also reportedly considering a merger with a blank-check company. Hybrid cloud is an IT architecture that incorporates a specific degree of workload portability, orchestration, and management across two or more environments. One of the main reasons healthcare companies look to deploy hybrid clouds is for control over IT spending, as those that used public clouds spent 26 percent of their annual IT budget. This number is set to increase by 35 percent in 2021.
IBM has a market value of $108 billion, but has faded to the background as cloud-computing rivals Microsoft Corporation and Amazon rise to valuations over 10 times greater. IBM hopes that its shifted focus to hybrid cloud operations could increase its overall revenue.
In mid-October 2020, IBM announced that it is splitting into two separate companies to boost its hybrid cloud growth strategy to drive digital health information for its clients.
The company’s spinoff (NewCO) will operate its Managed Infrastructure Services unit of its Global Technology Services division. It will be the world’s leading managed infrastructure provider and will have partnerships with more than 4,600 technology-intensive clients in 115 countries.
IBM Watson Health’s long serving chief health officer, Dr. Kyu Rhee left the company after 10 years last month to join CVS Health as its new chief medical officer.