IBM\'s quiz-show star to earn big cash on Wall St

IBM's Watson computer, which beat champions of the quiz show Jeopardy! a year ago, will soon be advising Wall St on risks, portfolios and clients.

Citigroup, the third-largest US lender, is Watson's first financial services client, IBM said yesterday. It's going to help analyse customer needs and process financial, economic and client data to advance and personalise digital banking.

IBM expects to generate billions in new revenue by 2015 by putting Watson to work.

The technology giant has already sold Watson to health-care clients, helping WellPoint and Seton Health Family analyse data to enhance care.

IBM executives say Watson's skills - understanding and processing natural language, consulting vast volumes of unstructured information, and accurately answering questions with humanlike cognition - also are most suitable to the finance industry.

Financial services is the "next big one for us," said Manoj Saxena, the fellow answerable for finding Watson work.

IBM is confident that with a little bit training, the quiz-show star that may read and understand 200 million pages in three seconds could make money for IBM by helping financial firms identify risks, rewards and customer wants mere human experts may overlook.

Banks spent about US$400 billion ($489 billion) on information technology last year, said Michael Versace, head of risk research at International Data Corp's Financial Insights, which has done research for IBM.

Watson the financial assistant may be delivered as a cloud-based service and earn a percentage of the extra revenue and price savings it could help financial institutions realise.

Watson, including its work inside the health-care and finance industries, will contribute "a portion" of IBM's target of US$16 billion of analytics revenues in 2015, Saxena said, and that portion will "have a B next to it".

Watson may add US$2.65 billion in revenue in 2015, Ed Maguire, an analyst at CLSA in Big apple, estimated in a research note.

IBM, the world's biggest computer-services provider, reported revenue of US$107 billion in 2011 and earnings of US$13.06 a share. The corporate ended 2011 with US$11.9 billion in cash.

IBM shares closed above US$200 for the primary time yesterday, factoring in stock splits.

Watson "may give an edge" in finance, said Stephen Baker, author of books The Numerati and Final Jeopardy, a Watson biography.

"It may plow through newspaper articles, documents, SEC filings, and take a look at to make some sense out of them, put them right into a context banks have an interest in, like risk."

As well as Citigroup, Armonk, Long island-based IBM have been working with financial institutions teaching Watson the language of Wall St, and adding content including regulatory announcements, news and social media feeds. "It is not selling them software, it's selling them outcomes," Saxena said.

Watson offers a "more global" picture by looking beyond financial data, Saxena said. For instance, Watson can comb prospectuses, loan performances and earnings quality while also uncovering sentiment and news not within the usual metrics before offering portfolio recommendations. It might probably also monitor trading, news sources and Facebook to aid a treasurer manage foreign currencies risk.

A few of the biggest financial institutions have already built big data centres. IBM is competing with most other major technology companies to sell them tools to analyse and use accumulated information, Versace said. "Apparently Citi gets it - analytics is the hot core in competitive banking," Versace said.

Watson gives IBM "a tremendous marketing edge" within the race among tech giants including Google and Microsoft to procure intelligence for businesses by teaching machines to appreciate sentences and paragraphs instead of on the search for single words or phrases, said author Baker.

Parts of Watson could already be combined with other IBM technologies to assist banks with regulatory compliance by surveying internal documents and flagging those who seem amiss, Baker said. Watson was designed to be loaded with information as opposed to grapple with a live streaming feed, making it likely IBM will partner it with other technologies.

Watson will have applications for telecommunications companies, and even perhaps call centres, said Saxena, who joined IBM when it acquired his company Webify Solutions in 2006.

IBM plans to take advantage of Watson in financial services "mostly for portfolio risk management, they are not going to do stock picking", CLSA's Maguire said.

Still, Watson isn't perfect. It's weak in languages except English, and its processing of social media streams from platforms including Facebook and Twitter may be sluggish. The lag is "getting shorter", Saxena said.

A year ago last month, about 15 million viewers watched Watson beat former Jeopardy! champions Ken Jennings and Brad Rutter - a highly publicised victory in artificial intelligence that IBM always aimed to use to the business world.

Watson needed to find out how people speak and write, and evaluate its level of understanding, said Eric Brown, a member of the team that built him in an IBM research facility in Big apple. Precise answers delivered with confidence distinguish Watson from web searches, Brown said.

"I'm sure they use all these things internally to administer their very own portfolio," said CLSA's Maguire. "IBM's treasury is greater than a whole lot of trading desks. In the event that they went into asset management they might kick ass, but that is not what they do."

ELEMENTARY
* IBM's Watson computer can read and understand 200 million pages in three seconds.
* Last year Watson beat former champions Ken Jennings and Brad Rutter on US TV quiz show Jeopardy!.
* Now IBM is applying the technology to the finance and healthcare industries.
* Watson is anticipated to contribute billions to IBM's base line by 2015.

- Bloomberg

By Beth Jinks