IBM Agrees to Acquire Weather Channel's Digital Assets

Why IBM Is Buying Weather Co. Digital Assets
  • Combination to form basis for new Internet of Things unit
  • Television channel isn't part of purchase; terms not disclosed

IBM agreed to acquire digital assets from Weather Co., which include the Weather Channel and Weather Underground apps and websites, attempting to strengthen its ability to crunch data for customers and capitalize on the so-called Internet of Things.

The Weather Channel television property, which isn’t part of the acquisition, will license weather forecast data and analytics from IBM under a long-term contract, the Armonk, N.Y.-based company said in a statement Wednesday.

Terms of the purchase weren’t disclosed.

Chief Executive Officer Ginni Rometty has been seeking to bolster IBM’s cloud and data analytics offerings, shifting from software sales and information-technology services amid a stock decline and multiyear revenue slump. The Weather Co. acquisition extends a bet that so-called cognitive computing by IBM’s Watson division, which draws insights from vast amounts of data, will drive future growth. IBM this year purchased Merge Healthcare for $1 billion to add medical imaging technology and data to the Watson Health Cloud business unit.

Combining the technology and expertise from the two companies will serve as the foundation for the new Watson Internet of Things unit and cloud platform, IBM said. The Internet of Things refers to connecting everyday machines, such as home appliances, so people can control them with mobile devices.

‘High Volume’

While IBM already had access to the Weather Channel’s data, the acquisition will allow IBM to use the underlying platform, which “can ingest data at a very high volume in fractions of a second that will be an engine that feeds Watson,” John Kelly, a senior vice president at IBM, said in an interview on Bloomberg Go. The applications and websites handle 65 billion unique accesses on weather data a day, he said. 

IBM plans to expand the capabilities to industries beyond weather “in a matter of months and quarters,” Kelly said.

Weather Co.’s owners -- Blackstone Group LP, Bain Capital LLC and Comcast Corp.’s NBCUniversal -- have been working with Morgan Stanley and PJT Partners Inc. to explore a sale, people with knowledge of the matter said in August. The three firms acquired the company for about $3.5 billion in 2008.

The company’s digital businesses include The Weather Channel’s website, Weather.com; Weather Underground; and Weather Services International. Two-thirds of U.S. consumers over 18 years old use a Weather Channel brand monthly, according to the company’s website.

SEC Probe

IBM’s shares rose 2.2 percent to $140.83 at the close in New York. The stock fell to a five-year low on Tuesday after the company disclosed that the U.S. Securities and Exchange Commission is conducting an investigation related to revenue recognition in the U.S. the U.K. and Ireland. IBM said it was cooperating with the probe.

Underscoring the challenges of its strategic transition, IBM last week lowered its full-year profit forecast, excluding some items, to $15.25, plus or minus 50 cents from a previous outlook of $15.75 to $16.50. The company remains dependent on big software deals, which take time to secure, while it invests in its strategic shift. IBM’s goal is for the new businesses to deliver $40 billion in revenue and account for 40 percent of total sales by 2018.

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