‘Watson’ IPO Could Be Bigger Than Facebook

At a 100 years old, IBM (NYSE:IBM) still is a hot tech company.

During the past week, its stock hit an all-time high of $201.19, reaching a market cap $228 billion. It actually is the third-most valuable tech company, behind Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). And last year, Berkshire Hathaway‘s (NYSE:BRK.A, NYSE:BRK.B) Warren Buffett shelled out $10.3 billion for a 5.5% stake in IBM.

Sure, with its massive global infrastructure, IBM is positioned to capitalize on some of the biggest growth trends in tech, such as mobile, big data and cloud computing. Thanks to its aggressive acquisitions, IBM has some of the best infrastructure software technologies around.

But perhaps its greatest asset is a lowly game-show contestant.

That’s right, I’m talking about Watson. The cutting-edge artificial-intelligence supercomputer that was set to work beating Jeopardy!’s all-time best players.

In addition to actually being able to whip out answers in English, Watson also can process about 1 million books per second! But the computer has many valuable commercial applications. For example, bank giant Citigroup (NYSE:C) is looking at Watson as a way to improve the customer experience through data analysis. And health insurer WellPoint (NYSE:WLP) already uses Watson to help physicians to diagnose patients.

According to IBM, the computer might generate billions in revenues — CLSA analyst Ed Maguire estimates $2.65 billion annually, or 52 cents of earnings per share, by 2015 — over the next few years.

Heck, Watson might be so successful, IBM could end up considering a spinoff. The technology is much more cutting-edge than other hot companies like Twitter, Zynga (NASDAQ:ZNGA) and even Facebook. A public offering definitely would generate interest.

OK, maybe that’s a fantasy scenario. Still, if Watson ever hopes to get to that point, it’ll have to stretch its market muscles. So besides health care and financial services, how else could Watson change the business game? Here are a few ways:

Robo C-Suite

Running a company is an extremely difficult job, but Watson could provide a number of services. It could provide deep analysis on customer information, competitors and industry trends. Watson could find ways to cut costs and find new revenue sources.

Hey, he might even be able to deal with legal questions. And what company wouldn’t want to get rid of a few lawyers? Watson could be a CEO’s best friend.


Many sites help you save a buck, such as Priceline.com (NASDAQ:PCLN) and Expedia (NASDAQ:EXPE). But they usually are fairly limited in terms of industry focus and analysis.

Watson could transform the landscape by powering a site called SaveOnAnything.com. Type in any question about a product or service, and you’ll get the best deal in seconds. And monetization is easy: Watson — er, SaveOnAnything.com — could charge a reasonable subscription fee.

Get a Piece of Google and Apple

Even the biggest tech giants like Google (NASDAQ:GOOG) and Apple wouldn’t be safe.

A Watson search engine could end up surpassing Google’s. Considering Watson’s knowledge of the English language, searchers wouldn’t need to type quirky word fragments just to get the right results.

And those same voice-recognition powers would be perfect for a mobile app. Sure, you can talk to Apple’s Siri, but wouldn’t you rather talk to a celebrity like Watson?

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2012/03/watson-ipo-could-be-bigger-than-facebook/.

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