IBM Watson on the cutting edge of AI? Not so fast says Jeffries, who states that the firm trails other tech giants for hiring top tier AI talent and suffers from high data and consulting engagement costs which will lead to shareholder value destruction rather than creation.
IBM’s Watson unit is receiving heat today in the form of a scathing equity research report from Jefferies’ James Kisner. The group believes that IBM’s investment into Watson will struggle to return value to shareholders. In recent years, IBM has increasingly leaned on Watson as one of its core growth units — a unit that sits as a proxy for projecting IBM’s future value. In the early days, IBM’s competitive advantage was its longstanding relationships with Fortune 500 companies. IBM Watson effectively operates as a consultancy where the company engages in high-value contracts with corporates to implement Watson technology for specific business cases. Unfortunately, IBM is struggling to bridge the gap between client needs and its own technological capability.