Too Hasty On Healthcare: IBM Embarks On Watson Health Sell-Off

A recent report from Axios set the stage for IBM to sell off its Watson Health division. With the amounts of money changing hands in healthcare transactions these days, such as with Oracle's $28 billion acquisition of Cerner or Microsoft's $20 billion buy-out of Nuance, Watson's total projected price tag of a mere $1 billion is raising eyebrows. The healthcare vertical has become an increasingly attractive pursuit for enterprise companies in the past few years, but IBM may have jumped the gun with its 2015 decision to leverage its AI platform Watson for healthcare research.

Former CEO Ginni Rometty's plan to hone in on cloud and AI to drive a data-centric approach lost steam and fell by the wayside over the years. When Arvind Krishna assumed the position, he quickly put the kibosh on the approach, saying the broad healthcare vision might have been too optimistic. Holger Mueller, an analyst at Constellation Research, said, “IBM is really focusing on its hybrid cloud strategy. In the process it is trying to get rid of all assets that divert attention and capital, as well as carrying the risk of reputational damage. Watson Health certainly qualifies for all three, so it comes as no surprise that IBM may divest the unit.”

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In a deal expected to close in the second quarter of the year, investment firm Francisco Partners is acquiring Watson Health's healthcare data and analytics assets. These include Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex, and imaging software products. Financial terms of the transaction were not disclosed.