About that $1b... IBM says Watson Health assets fetched $230m in pre-tax profits
- Reference: 1658840411
- News link: https://www.theregister.co.uk/2022/07/26/ibm_watson_health_profit/
- Source link:
When the tech was [1]flogged off to private equity firm Francisco Partners in January, it was said to be valued at a [2]cool $1 billion . In an SEC [3]10-Q filing on Monday, Big Blue disclosed it had indeed received a cash payment of $1,065 million.
However, during IBM's latest [4]earnings call , CFO Jim Kavanaugh told Wall Street analysts the sale, which completed in the second quarter, amounted to a pre-tax profit of about a quarter of the headline figure:
At the end of June, we closed on the divestiture of our healthcare software assets, generating a pre-tax gain of about $230 million in the period.
IBM didn't realize the full benefit of the sale price because it had to account for expenses. "Mitigating that benefit to our overall profit results, we took charges to address stranded costs associated with the divestiture and absorbed operating losses related to the health business, together, [of] over $75 million," he added.
The Watson Health business was launched in 2015, and IBM subsequently spent circa $4 billion on related acquisitions to expand revenues and its tech capabilities, yet profits eluded the unit.
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Last month, Big Blue chairman and CEO Arvind Krishna confirmed he expunged Watson Health's assets because his organization [6]didn't have the necessary vertical expertise to make it fly.
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"It's a question of verticals versus horizontals. We believe that we are better positioned to take these technologies. We will always have an industry lens but through our consulting team. We want to work on technologies that are horizontal across industries," he told an audience at Bernstein's 38th Annual Strategic Decisions Conference.
"Verticals should belong to people who really have all of the domain expertise, they have credibility in that vertical. And so I think that the healthcare companies, people in medical devices, they have the credibility to carry out how AI is applied to health in depth," Krishna added.
[9]IBM's self-sailing Mayflower suffers another fault in Atlantic crossing bid
[10]AI inventors may find it difficult to patent their tech under today's laws
[11]IBM ordered to hand over ex-CEO emails plotting cuts in older workers
[12]IBM adds side order of NLP to McDonald's AI drive-thru chatbots
He said he was convinced that AI applied to healthcare and other verticals will be a massive market in a decade or two and the winners will be the ones with a deep domain expertise.
Required will be doctors and nurses that talk to the buyers of Watson Health. "That's not the IBM go-to-market field force, so there's a misalignment." ®
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Editor's note: This article was updated to make clear that though IBM ultimately recorded just a $230 million pre-tax gain from the sale, it did receive a billion dollars in cash from private equity. We're happy to clarify the situation.
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[1] https://www.theregister.com/2022/01/24/in_brief_ai/
[2] https://www.bloomberg.com/news/articles/2022-01-21/ibm-is-said-to-near-sale-of-watson-health-to-francisco-partners
[3] https://sec.report/Document/0001558370-22-010985/
[4] https://www.fool.com/earnings/call-transcripts/2022/07/18/ibm-ibm-q2-2022-earnings-call-transcript/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YuAPn7riYmFs3aoFl8RsRAAAAQo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[6] https://www.theregister.com/2022/06/08/ibm_ceo_arvind_krishna_explains/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YuAPn7riYmFs3aoFl8RsRAAAAQo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YuAPn7riYmFs3aoFl8RsRAAAAQo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2022/06/02/ibm_mayflower_ship/
[10] https://www.theregister.com/2022/07/09/ai_patent_feature_1/
[11] https://www.theregister.com/2022/06/13/ibm_discrimination_email/
[12] https://www.theregister.com/2022/05/30/ibm/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YuAPn7riYmFs3aoFl8RsRAAAAQo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[14] https://whitepapers.theregister.com/
Reading that statement felt like playing tic-tac-toe with linguistics, so, "Yes"?
Although, re-reading the statement, I can see why the word salad was used - He was admitting fault. Rough translation: "We got into something we don't know jack about. This normally doesn't stop us, we can have consultants bail us out; but in medical, it seems even our consultants can't bullshit our way out of 'practicing medicine without a license' charges."
Answers
. Does Watson generate their executive statements? ------ No. Watson is capable of creating coherent sentences.
. Are words selected entirely at random ? ----- No way to tell. Would need a larger sample to test for randomness.
. Could we use Watson to read the statements? ----- Probably. Unless Watson refused to be associated with the effort.
. Would that be a new vertical, horizontal, or diagonal? ----- None of the above? An entanglement perhaps.
Re: Answers
Where's amanfrommars when you need them? ;)
mmm
seems like a load of corporation bollocks speak.
MBA - Memorise Bollocks Authoritatively
Re: mmm
Horizontal bollocks? Vertical bollocks? Or
Perhaps the bloom is off the AI rose
I cannot help but wonder what the inability of IBM to make Watson Health profitable or to offload it to an actual healthcare entity represents. Are we seeing a concrete example that AI/ML cannot produce the results the hype machine promised? Can we expect to see more announcements of the shuttering of other various startups and corporate AI efforts in the near future?
Re: Perhaps the bloom is off the AI rose
> Are we seeing a concrete example that AI/ML cannot produce the results the hype machine promised
I suspect that it's the same issue as per self-driving cars, in that it's a mix of legal and technical concerns.
Or to put it another way: the legal costs involved with any technical solution which isn't 99.999% perfect are simply going to be too high!
In comparison, this makes spending $1.5 billion on bitcoin looks like a stroke of genius!
does Watson generate their executive statements, or are the words selected entirely at random? Could we use Watson to read the statements? Would that be a new vertical, horizontal, or diagonal? o_0