IBM Stock Prediction to Get Brighter on This Program

The IBM stock prediction for the rest of 2015 is not exactly what investors want to hear - but there is a promising development taking shape ...

International Business Machines Corp. (NYSE: IBM) will announce Q3 earnings today (Monday) after the bell. Investors are worried about how IBM stock will move post-earnings because the company has reported 13 straight declines in quarterly revenue.

IBM stock prediction Total revenue for IBM decreased 9.79% from 2012 to 2014.

Several Wall Street predictions on IBM don't see any reason Q3 earnings will buck the trend.

One problem is this technology giant's software division is the biggest contributor to the IBM stock value, according to Forbes. And in the last IBM earnings report, software revenue fell to $5.8 billion from $6.5 billion from the same period a year before.

Forbes analysts expect software revenue to decline once again in Q3.

One reason for the decline is the company is transitioning into the booming cloud computing industry. Research and analytic company IHS Technology projected that enterprise spending on cloud computing will be $235.1 billion in 2017. That's more than triple the $78.2 billion that was spent in 2011.

IBM reported on July 20 that cloud computing revenue rose by more than 70%.Total cloud revenue for IBM was $8.7 billion from July 2014 to July 2015.

But that's not enough to appease IBM shareholders, who are getting antsy. Reuters reported in April that IBM shareholders wanted help from activist investors like Bill Ackman to help unlock more IBM stock value.

While the latest earnings report is unlikely to show a revenue reversal, there is one program that IBM wants to focus on to drive earnings growth - and to encourage more bullish IBM stock predictions...

What Can Change Long-Term IBM Stock Predictions

In 2015, IBM made a $1 billion purchase into a new business unit for its supercomputer system. IBM described this system as the biggest innovation to date.

Executives believe this supercomputer could generate $1 billion of revenue by 2018.

Money Morning readers may have first learned about this potential billion-dollar generator on "Jeopardy" in 2011...

The artificial intelligence computer system made head waves on "Jeopardy" in 2011. Known as Watson, IBM's supercomputer defeated Ken Jennings for a grand prize of $1 million.

IBM's Watson was specifically designed to defeat human players on the game show. And Watson reportedly generated $100 million in revenue in 2013.

Now, IBM plans to unleash the supercomputer's powers for lucrative ventures...

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Baylor College of Medicine used Watson's Discovery Advisor system to pinpoint proteins that modify a protein involved with slowing down or preventing tumor growth, according to the website LiveScience. Watson was able to read 70,000 studies and identified six other proteins that could modify the other protein.

By 2018, IBM CEO Ginni Rometty expects $1 billion in revenue from Watson. By 2023, she expects $10 billion in annual revenue. Watson will serve as an invaluable resource to hospitals and doctors for analyzing data. Rometty also believes that Watson can offer specialized consulting for businesses to gain insights on their operations.

IBM also announced a plan on Aug. 6 for a huge acquisition that provides IBM direct access into thousands of healthcare facilities. Watson will have the ability to use its advanced image analytics and cognitive capabilities with data and images obtained from Merge Healthcare Inc. (Nasdaq: MRGE).

Merge's technology platforms are used in more than 7,500 U.S. healthcare sites, according to a press release from IBM.

Aside from the health industry, companies are providing consumers valuable data through Watson's supercomputing abilities...

Baseball stat company AriBall will launch a beta service in November for fantasy players, according to Business Insider. The company will use Watson Analytics to help fantasy players draft their teams and choose which players to use in a lineup.

The Bottom Line: The IBM stock price will not see a significant turnaround anytime soon. The company is still transitioning from its reliance on software to cloud computing services. Because of the many applications and relative infancy of Watson, there are plenty of possibilities that this supercomputer can greatly improve the health of IBM's stock and bottom line. But IBM stock is not for those expecting a quick turnaround.

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