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Acquisitions Should Boost IBM's Outlook for 2016

Today's big earnings report will also shine a light on the state of Big Blue's Watson cognitive computing business.

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This year’s outlook for computing giant IBM may be about to improve, as recent acquisitions in areas like cloud computing and health care technology start to have an effect.

Big Blue will report quarterly earnings after markets close today. Analysts surveyed by Thomson Reuters are calling for a per-share profit of $2.09 on revenue of $18.3 billion. Revenue fell short of expectations in January, when the company last reported, in part because of currency-related headwinds. A recovery in the strength of the euro versus the U.S. dollar should offset some of those currency worries today.

Currencies are one of a few things that may be turning IBM’s way, analyst Amit Daryanani of RBC Capital argued in a note this morning: A big factor is that recent acquisitions including Truven Health Analytics, The Weather Company and Merge Health should start to show up meaningfully in IBM’s forecasts.

Another focus of recent acquisitions has been video: IBM has decided to go big on video services delivered via its cloud infrastructure. Today it announced wins with Canada’s major TV network CBC, with AOL, the Verizon-owned Web media player, and Comic-Con to provide the video infrastructure behind their video streaming services. It’s part of a wider bet on Web video starting when it acquired UStream in January and used it as the backbone of a new video business unit.

Still, CEO Ginni Rometty’s efforts to turn around the 105-year-old company haven’t fully taken hold just yet: The Global Business Services unit, which focuses mainly on tech consulting and accounts for about 20 percent of sales, has posted revenue declines for seven straight quarters.

There will also be a lot of attention on another new business segment, Cognitive Solutions, which includes IBM’s business of selling Watson, its game show-winning artificial intelligence system that has since branched into health care-related fields including, most recently, treating cancer. It’s IBM’s most profitable business unit, with gross margins in the range of 85 percent, and its expectations for the year will be pretty closely watched.

And speaking of IBM, Rometty will be speaking at our next Code conference at the end of next month. She’s one of many Code 2016 speakers, and you should watch for more big names in the coming weeks.

This article originally appeared on Recode.net.

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