$2.6B analytics buy, stock upgrade trigger 5% rally in IBM shares

Two pig news stories Thursday ignited a rally in IBM (NYSE: IBM) shares.

IBM’s Watson Health is buying Michigan-based Truven Health Analytics in a deal worth $2.6 billion. It’s the fourth acquisition IBM Watson has made since its launch in April of last year. The deal adds some 2,500 employees and a wealth of data to a growing Watson repository.

Meanwhile, Morgan Stanley upgraded IBM’s stock to “overweight” from “equal weight,” forecasting a return to growth. The news sent IBM shares up 6 percent or more than $6 a share to $134 on Thursday.

Shares ended up 5 percent or $6.35 to close at $132.45. According to the Financial Times,the rally was the biggest for IBM shares in four years.

Nearly 10 million hares were traded. That’s twice the daily average.

Morgan Stanley said IBM’s transformation plan is beginning to deliver positive results and paving the way for future growth.

Part of that plan is IBM’s Watson health unit, which is about to double in size.

IBM plans to incorporate Truven data into its “Watson Health Cloud” through which healthcare providers and organizations “create unique insights that help inform a broad range of health decisions.”

“With this acquisition, IBM will be one of the world’s leading health data, analytics and insights companies, and the only one that can deliver the unique cognitive capabilities of the Watson platform,” said Deborah DiSanzo, general manager for IBM Watson Health.

“Truven’s impressive team, extensive client roster, and expansive data sets complement Watson Health’s broad-based team, capabilities and offerings. Together, we’re well positioned to scale globally and to build first-in-class offerings designed to help our clients apply cognitive insights in a value-based care environment.”

Watson uses machine-learning and natural-language skills to analyze and find trends in data from a wide variety of sources. IBM has been promoting Watson and related technology as a powerful tool that also can be used in retailing and other industries.

The deal also is the latest in several made recently – including three digital marketing agencies over the past month – as IBM Chair and CEO Ginni Rometty continues her effort to transform Big Blue from its traditional tech and hardware roots.

At an IBM conference earlier this week, Rometty said she was determined to turn IBM into “a cognitive solutions and cloud platform company.”

Cognitive is the emerging pillar of four that Rometty is stressing, the others being big data/analytics, the cloud and mobile solutions.

“The cognitive era stands to be the most disruptive, but it will be the most differentiating,” she told IBM partners, according to CRN. “Like digital today, the world will embrace cognitive tomorrow. Without it, we’ll be overwhelmed by data, and won’t stand a chance to solve some of the big problems out there.”

The Truven deal

By acquiring privately held Truven (owned by Veritas Capital), IBM Watson will gain access to more than 8,500 clients and health data for millions of people. Veritas bought the firm from Thomson Reuters for $1.25 billion in 2012, according to media reports.

“Upon completion of the acquisition, IBM’s health cloud will house one of the world’s largest and most diverse collections of health-related data, representing an aggregate of approximately 300 million patient lives acquired from three companies,” IBM said. “IBM plans to integrate Truven’s extensive cloud-based data set spanning hundreds of different types of cost, claims, quality and outcomes information with its existing data sets.”

The deal is expected to close later this year.

IBM says it has invested more than $4 billion in the acquisitions to expand Watson Health.

Earlier acquisitions include: