International Business Machines Corporation (IBM) is reportedly divesting Weather Business, a subsidiary of IBM.
The divestiture is part of the company’s long-term strategy to strengthen its core business aspects by ensuring more streamlined operations, according to Yahoo! Finance.
Referring to the people with knowledge of the divestment, Yahoo! Finance said that the sale is expected to be transacted for roughly $1 billion if consummated as planned.
IBM Acquiring the Weather Company
On 28th October 2015, IBM announced the acquisition of the Weather Company as part of its effort to accelerate its move into the then-hot IoT. The deal value was pegged at roughly $2 billion and also included the sell-off of The Weather Company’s B2B, WSI, weather.com, mobile and cloud-based web properties, Weather Underground, and The Weather Co. brand. However, due to its long-term agreement to supply weather data to the Weather Channel, IBM didn’t acquire it.
IBM announced the purchase in October 2015 as part of its effort to accelerate its move into the then-hot IoT market.
The deal was inked in order to leverage IBM’s own cloud server that can deliver precise weather projections accumulating around 25 billion forecasts per day.
With this acquisition, IBM – the IT giant – was committed to yielding high-profit margins by leveraging the wave of data-crunching systems.
During its eight years of ownership, IBM successfully boosted its weather services. It enhanced the modeling technology of the Weather Company and devised high-end predictive software to use firehose of data crowdsourced from the barometers of smartphones running the Weather Channel application and from aircraft sensors.
The buy-in was completed on 29th January 2016.
Breaking Down the Reasons Behind the Divestment
In order to simplify and streamline operations, IMB has been reported to spin off its weather business which includes the divestiture of weather.com.
As part of its effort to restructure the company around its core AI and hybrid cloud services, IBM has already divested some non-core businesses and healthcare units. For example, in November 2021, IBM declared the separation of part of its managed infrastructure services business to Kyndry Inc. For this, the company charged around $300 billion through Q1 2023 from the start of the company’s carve-out in 2021.
Earlier this year, the company laid off around 3900 staffers after spinning off one of its business units and divesting a healthcare data analytics business.
However, IBM is yet to generate more sustainable and measurable returns due to its year-over-year revenue growth reaching a plateau.
IBM’s revenue increased by more than 8% in the first quarter of the year, exceeding the growth registered in the final quarter of 2021. Despite the increase in revenue, IBM’s profit in Q1 was impacted by the hiking cost of cloud infrastructure development.
Successful Divestment Needs Strategic Planning
Divestments can take any form – sell-offs, split-ups, carve-outs, spin-offs, etc.
Whatever form the process takes, to ensure minimal business disruption, divestments should be planned meticulously.
For businesses looking to accelerate the transaction timeline while ensuring data accuracy, leveraging a high-end consulting service like Fission Consulting is a sensible business investment. An expert consulting agency helps clients streamline each stage of the divestment process, dodging uncertainty throughout the project.
No matter the reason, IBM expects divesting The Weather Business will act as a step-change in helping the company streamline the operations of its core business.