- IBM is selling the data and analytics assets of its Watson Health business to a private equity firm as it looks to refocus on its core cloud business.
- The sale, which is expected to close in the second quarter this year has been anticipated for quite some time, and comes following the limited success of Watson Health, despite a spate of high-profile acquisitions of health information companies to bolster the enterprise.
- Financial terms of the deal were not disclosed. IBM's stock drooped slightly in Friday's trade following the news.
Despite the computing giant's big aspirations for the potential of AI applications in medical research and clinical decisionmaking — and spending millions to acquire health IT players including Truven, Merge Healthcare and Explorys — Watson Health fell short, leading IBM to begin exploring a sale of the beleagured healthcare analytics segment.
Tom Rosamilia, senior vice president of IBM Software, said in a statement the deal is a next step allowing IBM to focus more intensely on its platform-based hybrid cloud and AI strategy, though New York-based IBM remains committed to supporting its clients in health IT.
IBM never gained as much traction in the health IT market as some of its chief competitors, like Google and Microsoft, according to Paddy Padmanabhan, CEO of Damo Consulting.
"In the current competitive landscape, IBM would not be considered a significant player in healthcare. Selling off the data assets essentially means an end to the Watson Health experiment," Padmanabhan said, though it could allow IBM to develop a new approach to healthcare.
The spoils of the divisional carveout are going to PE firm Francisco Partners, which has invested in more than 400 technology companies since launching more than 20 years ago, including healthcare players like GoodRx and Zocdoc.
The agreement appears to hinge largely on Watson Health's products and datasets, which Francisco will likely look for ways to monetize.
Watson Health was originally launched in 2015 with the goal of applying IBM's algorithms to derive advanced insights with real-world applications. However, the division struggled to bring that vision to fruition.
In one early misstep, IBM's marketing for Watson for Oncology, a project using AI to generate cancer treatment advice, greatly oversold the product's capabilities, which weren't backed up with clinical evidence. The move was met with complaints from doctors and clients after finding Watson for Oncology in some cases was issuing unsafe and incorrect treatment recommendations, and was followed by flagging sales, layoffs and management turnover.
The Watson Health sale hints at the challenges of disrupting U.S. healthcare, a problem faced by other tech giants like Amazon and Google as they elbow into the industry. Amazon, for example, has reported challenges scaling its Amazon Care business, while Google faced a firestorm of controversy in 2019 over using medical data from millions of Americans to develop new product lines without their consent.
However, the AI in healthcare landscape is still very attractive to big tech, as companies look to harness the industry's massive datasets to move the needle on care quality and streamline administration, while nabbing a share of the profits. AI was cited as one of the top technology investments for healthcare executives in a survey conducted last year.
And some cloud companies are still looking to scoop up data, even as IBM steps aside: Oracle acquired EHR giant Cerner in December for more than $28 billion.