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IBM Reportedly Mulls Sale of Watson Health Unit. Here’s What It Would Mean for the Stock.

IBM CEO Arvind Krishna has been looking for ways to streamline the company.

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IBM is reportedly considering the sale of its Watson Health business.

According to The Wall Street Journal, the company is considering various options for the business, which has about $1 billion in revenue, well under 2% of the company’s total revenue. The Watson Health unit uses artificial intelligence techniques to serve hospitals, medical-device companies, pharmaceutical firms, and insurance providers. 

IBM (ticker: IBM) on Friday declined to comment on the report.

Watson Health includes multiple smaller brands, including Explorys (electronic health records), Merge Healthcare (AI health applications), Phytel (patient care coordination) and Truven Health Analytics. The Journal story asserts that the group isn’t profitable.

IBM CEO Arvind Krishna, who took the top job last April, has been looking for ways to streamline the company and focus on growth businesses. Last October, the company announced plans to spin off its $19 billion managed-infrastructure services business, while zeroing in the rest of the company on hybrid cloud software and services.

In a research note, Evercore ISI analyst Amit Daryanani writes on Friday that a move to spin Watson Health would be viewed positively by investors. “While the financial implication from this is likely minimal, the strategic relevance of IBM consolidating their focus around the multi/hybrid cloud narrative and reducing the noise in their portfolio would be a positive,” he writes. 

IBM stock on Friday is down 0.8% to $119.73.

Write to Eric J. Savitz at [email protected]

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