Is IBM a good investment

IBM: Investing in Watson is not paying off

The investment bank Jefferies assumes that IBM's artificial intelligence Watson will not deliver any added value to the company's shareholders in the foreseeable future. In a report for investors, the financial services provider refers, among other things, to a failed project of the cancer research center MD Anderson. The institution belonging to the University of Texas is said to have discontinued its business relationship with IBM. She previously invested about $ 60 million in Watson technology.

According to Jefferies, Watson's success to date has been based on IBM's strong relationships with a variety of Fortune 500 companies. So far it has primarily been about integrating the Watson technology into specific business processes within the framework of very lucrative contracts. In the meantime, however, there is a gap between the requirements of the customers and the technical possibilities of Watson.

MD Anderson finally described Watson as "not ready" for research or clinical use. TechCrunch says there are similar statements from financial service providers and biotech companies. Accordingly, it is not about malfunctions that weigh on the success of a Watson project, but about advertising claims that cannot be kept. There are also deficits in the area of ​​deep learning.

Machine learning: IBM is being overtaken

Jefferies sees the company's job applications for developers in the areas of machine learning, artificial intelligence and deep learning as a further indication of IBM's problems. The search for relevant job offers yielded significantly more entries from Amazon or Apple than from IBM. IBM seems to be falling behind when it comes to attracting new talent.

"Our research suggests that although IBM offers one of the most sophisticated platforms for cognitive computing today, the powerful service components of many AI implementations are an obstacle," the Jefferies report said. “We also believe that IBM appears to be inferior in the battle for AI talent. Finally, our analysis suggests that IBM's return on investment is unlikely to exceed its cost of capital. "

As a result, the investment bank rates the IBM share as overvalued. On Friday, the paper was priced at $ 154.24 at close of trading on the New York Stock Exchange. However, Jefferies thinks a price of $ 125 is justified, which would be roughly the same as February 2016. The IBM share last had a similarly low price in April 2010.

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