Would Buffett Support An IBM Watson Spinoff?

Warren Buffett, CEO of Berkshire Hathaway Inc. BRK and one of the most successful and iconic investors of all time, has drawn some criticism for his large investment in International Business Machines Corp. IBM. IBM’s stock is down more than 28 percent in the past two years, but Buffett still sees a lot of value in IBM’s question-answering supercomputer, Watson.

In his lengthy Monday morning appearance on CNBC, Buffett discussed the partnership between IBM’s Watson and Berkshire holding GEICO.

“You spend a considerable amount of time teaching Watson. Watson did not come knowing a single thing about insurance," Buffett noted. "Our job and IBM’s job is to educate Watson in all aspects of insurance.”

Buffett went on to explain that Watson’s ability to “remember” massive quantities of data and aide in decision-makes it an extremely valuable asset for IBM.

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Indiegogo founder and former CEO Slava Rubin believes that the best way for IBM to monetize Watson could be to spin it off. “I see potential for, 18-24 months from now, is there going to be a big argument that this Watson area should be spun off?” he asked on CNBC following Buffett’s interview.

CapGainr.com analyst Dallas Salazar believes that a spinoff of Watson would be one way to raise awareness of its capabilities in the business world.

“While I’m not sure how near-term this type of development would be or if this is even being talked about at IBM internally I do think this makes sense and I do think that this would work to grow Watson’s relevance in the space greater than keeping the solution in-house,” Salazar explained in a SeekingAlpha piece last year.

So far, Buffett is sticking to his guns when it comes to his losing bet on IBM and has not commented on a potential Watson spin-off.

Disclosure: the author holds no position in the stocks mentioned.