IBM Bullish On Watson Health

By Jof Enriquez,
Follow me on Twitter @jofenriq

IBM considers Watson Health a key cog in its long-term strategy as the biggest analytics provider, with nearly $18 billion in revenue, according to top executives. The company created the healthcare subsidiary in April to apply Watson's computing and analytics prowess to crunch growing health data and infer solutions. 

"We’ll extend that lead by moving into new areas including Watson Health and Watson Internet of Things," IBM SVP and CFO Martin Schroeter told analysts in an earnings call, according to Seeking Alpha. "In Watson Health, we are integrating our own organic capabilities with content acquired through Merge, Phytel, and Explorys. Healthcare is a new revenue and profit opportunity for us as we change the face of healthcare through our cognitive platform to provide value to providers, payers, and partners."

IBM's acquisitions in the past year have strengthened Watson as a healthcare-specific platform. Merge technology augments Watson's capability to process images from machines like x-rays, CT scans, and MRIs — which comprise 90 percent of all health data. Phytel provides the platform its population health management component, while Explorys' expansive clinical data set strengthens Watson's ability to extract and share deep insights on health problems.

During the earnings call, Schroeter said that IBM’s burgeoning Internet of Things (IoT) platform, which can process high-volume sensor data at scale to track and predict weather, will be cross-applied to health data analytics as well.

"And then we will layer in Watson to give it the cognitive capability to apply machine learning at scale. This then gives us the ability to expand this platform capability to industries beyond weather, like health," he said, according to the transcript.

The healthcare industry is one of the first adopters of Watson technology, and IBM has secured alliances with Medtronic, Johnson & Johnson, and Apple to aggregate health data from multiple devices and sources into its ever-expanding "big data" cloud platform.

IBM views healthcare to be ripe for disruption and brimming with opportunities. Judging from company-reported numbers, IBM's bold move into the industry by leveraging its cloud and analytics expertise is already paying off.

"In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue," stated IBM chairman, president, and CEO Ginni Rometty. "We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud."

"With 57 percent revenue growth over the last year, cloud is now a $10 billion business for us. This made us the largest cloud provider in 2015," Schroeter said during the earnings call. "With nearly $18 billion of analytics revenue, we’re also the largest analytics provider."

For the fourth quarter, IBM reported operating income (GAAP) of $4.5 billion, down 19 percent, and revenue from continuing operations of $22.1 billion. Full year results reflected operating income (GAAP) of $13.4 billion, down 15 percent, while revenue from continuing operations amounted to $81.7 billion.

According to Forbes, IBM beat Wall Street expectations when it reported earnings per share of $4.84, and revenue of $22.1 billion. The company said it returned $9.5 billion to shareholders through dividends and stock buy-backs for 2015.