It is reported that ibm will acquire Promontory Financial Group, a Washington-based financial consulting firm, to achieve greater goals of using artificial intelligence (AI) technology to analyze regulatory requirements and provide advice to financial institutions.
The computer maker said it is setting up a new division called Watson Financial Services, which will try to harness the power of its artificial intelligence computer system, Watson, to provide customers with risk and compliance. Advice on the aspect.
In the past four years, with the decline of its core computer business, ibm has suffered from the decline in revenue. The company's CEO, Ginni Rometty, has tried to counter this trend by focusing on new business areas such as analytics and cloud computing services. In these areas, the company has been investing with aggressive spending and implemented a $5 billion acquisition in the first half of this year. However, the company did not disclose its price in the Peng Rui M&A transaction.
Peng Rui is a consulting company founded and led by Eugene Ludwig, a top banking official during the Clinton administration. The company has more than 600 employees worldwide, many of whom have served in regulators, and now offer consulting services to banks they have overseen.
Through this alliance, ibm hopes to develop a market that helps banks manage a rapidly changing regulatory environment. According to ibm estimates, this niche market is about $270 billion a year. After the transaction with Peng Rui is completed, Peng Rui employees will help train the Watson system, so that the system can better understand risk and compliance issues.
The company said in a statement: "This is a perfect job for Watson's cognitive skills. It is intended to allow financial institutions to absorb changes in regulations, understand their obligations, and ... respond more quickly to compliance requirements. ""
Ibm said that Watson's possible tasks include tracking research on changing regulations, financial risk modeling, oversight, and anti-money laundering. The Watson system has defeated human entrants in the intellectual game variety show "Jeopardy!", making it famous. Previously, the system has been used for big data processing including cancer research, but so far there have not been any blockbuster commercial applications.
Ludwig said: "We believe that driving the business and regulating the future, in addition to the need for deep professional skills in the target area, also includes the need for advanced technology."
Last year, Peng Rui was involved in the bank's business with Iran for the services provided by Standard Chartered and faced legal proceedings in the New York State Department of Financial Services. Peng Rui reached a settlement on the allegations by paying a fine of 15 million US dollars and acknowledging the failure to comply with the regulatory requirements of the consulting company.
The acquisition of ibm or the determination of ibm reform, the decline of its core computer business, makes it begin to find a new way out. The direction is in the emerging field of artificial intelligence.
Can artificial intelligence save ibm?Some companies embraced reforms, and some companies were overwhelmed by reforms. In recent years, ibm's stock has performed poorly because investors are not sure which area it belongs to.
In June of this year, the technology giant ibm in Armonk, New York, was 105 years old, but before Ginni Rometty took over as CEO of the company in 2012, ibm was trapped at an intersection. The old computing technologies that ibm and its suits and consultants used to build their monopoly in the 20th century, such as servers and mainframes, have gradually failed to keep up with the times. Ibm understands that the company's future is pinned on cloud technology and artificial intelligence technology, and Luo Ruilan unswervingly promotes this concept. But this veteran technology company has slipped faster than the rise of technology rookies. The company's turnover has fallen for 16 consecutive quarters, and its turnover in 2015 fell to $81.7 billion. Not only that, but ibm's share price has fallen by 30% since it peaked in March 2013, and it is even worse than the Standard & Poor's 500 Index (S&P 500) by 62%. "We don't know when this is the case," Barclays analyst Mark Moskowitz said pessimistically.
With cloud computing, the company has not invested heavily in building its own infrastructure to store and manage data, and its emergence has revolutionized ibm. Cloud technology has weakened the market demand for IBM's servers and the accompanying high-margin consulting and support services.
Ibm competed for the cloud market with a market capitalization of $10.8 billion, accounting for more than 13% of the company's total turnover last year. But the company puts most of its energy into the so-called hybrid cloud service, which combines personal servers so that ibm can continue to provide "middleware" and support to its customers. According to the statistics of Moscow Witts, the profit of middleware accounts for about 40% of the total profit of IBM. But this business model has put ibm at a disadvantage when it competes with rivals such as Amazon and Microsoft who are less concerned about expensive "public cloud" services. "You won't be fired because of Amazon Web Services." UBS analyst Steven Milunovich said the company's chief information officer is Tell him this way. "This is a new ibm."
According to most people, ibm's share in the cloud market is less than 10%. Investors almost all believe that this business is unlikely to help ibm reverse its financial situation. The optimistic people pin their hopes on ibm's machine learning and artificial intelligence technologies. The Watson computer system is the most typical representative of the technology in the eyes of the public. This articulated device appears in the quiz. The show "Jeopardy!" and countless ads.
Earlier this year, Morgan Stanley analyst Katy Huberty raised the rating of ibm stock from neutral to buy-in. She believes that ibm is leading the way in artificial intelligence competition. Because the analysis capabilities of Watson's computer systems are likely to be used in many fields, such as tourism, finance and retail. Huberty said that ibm has recently managed to acquire a large number of artificial intelligence-based data, especially in the health care field, which has inspired her. In February, ibm Watson Health acquired Truven Health AnalyTIcs for $2.6 billion.
Moskowitz said that ibm did not disclose the specific financial situation in the field of artificial intelligence, and this is where the investors who want to know the specific data feel scratched their heads. But analysts say that IBM's "strategic mission" business, including artificial intelligence, as well as cloud technology, security and other projects, will account for more than half of the company's total sales in mid-2017. In 2015, sales of this business were $28.9 billion, up 17% from 2014. Competition in this field is also heating up. Google and Microsoft are also ambitious in artificial intelligence, but Huberty believes that if ibm's market share can reach 25%, artificial intelligence will "get 50 billion for the company easily." Dollar."
Of course, this is still full of uncertainty, and many investors are not optimistic about it. Of the 26 analysts who tracked ibm, only 7 rated ibm stock as Buy or Buy. In an atmosphere full of optimism, this ratio is somewhat unusually low. According to Morningstar, institutional investors such as mutual funds and pension funds have also chosen to abandon ibm stocks, which account for only 66% of ibm stocks, the same type of technology companies as ibm, such as Hewlett-Packard ( Hewlett Packard Enterprise) and Cisco Systems hold at least 82%. However, if ibm eventually reverses the decline in turnover, those institutional investors will re-buy their stocks, thus blowing a huge bubble for those who are willing to invest in IBM. ("This is another reason not to be too optimistic." Milunovic pointed out.)
Investors who are willing to take risks will buy shares in this still profitable company at a price-to-earnings ratio of 11 and receive a dividend of 3.4% during the holding process (this ratio is much higher than in the S&P 500 index). The average level of the company). There is also a well-known company that holds ibm shares with them. Warren Buffett's Berkshire Hathaway is the largest shareholder of ibm. Since the end of 2013, the company has bought 12 million shares of ibm. Berkshire holds a total of 81 million shares of ibm. Buffett bought nearly 200,000 shares in the quarter ending March.
Of course, Buffett also admitted that he may be wrong. Finally, I would like to give you a suggestion: If you can't afford to lose money, then don't buy ibm.
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