IBM will sell the health care data analytics business from its Watson Health unit to a private equity firm, the companies said Friday, for a reported price above $1 billion. IBM stock slipped.
The sale to Francisco Partners is the latest step by IBM to refocus its core business around the cloud. The announcement comes just ahead of IBM earnings, which will be reported after the market close Monday.
The Watson Health business uses artificial intelligence to analyze diagnostic tests and other health data. IBM has been reorganizing with an emphasis on cloud platforms that can serve companies across industries. As a result, it's moving away from sector-specific products like Watson Health.
A report by the Wall Street Journal earlier this month said IBM had been looking for a buyer. According to Bloomberg, the unit sold for more than $1 billion. IBM did not publicly disclose terms of the deal.
Clear Next Step For IBM
"Today's agreement with Francisco Partners is a clear next step as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy," said IBM senior vice president Tom Rosamilia in a statement. "IBM remains committed to Watson, our broader AI business, and to the clients and partners we support in health care IT."
IBM stock fell 1.1%, closing at 129.35 on the stock market today.
Watson Health was launched in 2015 and reportedly spent more than $4 billion on a series of acquisitions to build the health care unit. It was part of IBM's push into artificial-intelligence software. The aim of Watson Health was to use its core artificial intelligence platform to help health care providers analyze data and ultimately revolutionize cancer treatment.
The Struggle With IBM Stock
Major shifts in business operations help to explain why growth in revenue and earnings has been a struggle, and why IBM stock has struggled.
The sale of Watson Health follows the $19 billion spinoff of IBM's managed infrastructure business. That move was also part of IBM focus on cloud computing and artificial intelligence. The spinoff was completed on Nov. 3 and given the new name of Kyndryl. As a result, Kyndryl's historical operational activity has been reclassified to IBM's discontinued operations as required.
The current estimate among analysts calls for IBM adjusted earnings of $3.14 a share on revenue of $16.1 billion.
IBM stock is up 3% this year.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
