IBM Buyout of Weather Co. Would Be Another Huge Mistake

By Douglas A. McIntyre Published Oct 28, 6:28AM EDT

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International Business Machines Corp. (NYSE: IBM) has continued to struggle with earnings, the very modest success of its cloud business, recent revelations it is in the midst of an SEC investigation and a huge drop in its stock price. Its shares trade at a 52-week low. There are new rumors that IBM will buy the digital businesses of Weather Company, which operates The Weather Channel, another sign IBM can’t find an appropriate path to a successful future.

IBM, as it is today, is an amalgamation of its Watson AI product, which is a branding opportunity but brings in very little revenue; its cloud business, which trails most of its large competitors; a failing hardware business; and a long list of service businesses and software offerings. Wall Street has punished the company both for its financial results and a lack of vision by CEO Virginia Rometty.

Rometty’s latest failure was the most recent IBM quarterly earnings, which posted a drop in revenue of 13.9% to $19.3 billion, and a fall off of 14.3% in income from continuing operations after taxes to $3.0 billion. No other large U.S. technology company is doing as badly.

To further confuse what IBM is and is not, according to The Wall Street Journal, the company will buy Weather Co. for about $2 billion because:

IBM is particularly interested in Weather Co.’s forecasting group, WSI. That division houses technology and weather data that the Weather Co. collects, manipulates and licenses to companies ranging from airlines to utility companies to insurance providers.

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Also:

Weather Co. and IBM already have an alliance, struck earlier this year. The idea was to combine Weather Co.’s weather data and forecast information with IBM’s cloud computing skills and analytics know-how, so the two could come up with new ways to package and sell weather data and business solutions to different industries. IBM’s artificial intelligence service, Watson, is central to that arrangement.

The reasoning assumes that Weather Co. has done a poor job using “big data” on its own. Based on its success and its leadership in the forecast industry, that is almost certainly not true.

Weather Co. would allow faltering IBM to have two public faces: Watson, which is good for television commercials about IBM’s artificial intelligence and cloud skills, and Weather Co.’s digital assets, which will show that IBM can forecast the future — in one small industry.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.