International Business Machines Corporation (IBM – Free Report) recently announced that it has obtained a patent for a machine learning system, which is capable of switching control of an autonomous vehicle between a vehicle control processor and a human driver at the time of an emergency.
For example, if the autonomous vehicle experiences some sort of an operational glitch such as a burned out headlight, a faulty braking system, poor visibility and bad road conditions, the system will evaluate whether the driver or the on-board self driving vehicle control processor is positioned to handle the situation and shift the control accordingly.
We note that IBM has been taking huge strides in the autonomous driving technology space. In Jun 2016, the company collaborated with Local Motors, an AZ-based car maker to power the latter’s electric minibus – Olli.
However, shares of IBM have underperformed the Zacks Computer – Integrated Systems industry over the last one year. While the industry appreciated 19%, the stock gained 14%.
The underperformance of the stock could be due to its time consuming transition to the cloud, weakness in traditional businesses, lower IT spending worldwide as well as an increasing competitive landscape.
Scope for IBM in Autonomous Driving
As per a report by the Boston Consulting Group,the autonomous driving technology market is estimated to reach a whopping $42 billion by 2025, which is further expected to grow to $77 billion by 2035.
Competition is brewing with the presence of major players such as Alphabet (GOOGL – Free Report) , Intel (INTC – Free Report) , which recently acquired Mobileye, NVIDIA (NVDA – Free Report) and Tesla.
However, we expect that with such patent wins, IBM is well positioned to take the competition head on through licensing the technology to third parties, which augurs well for the company in the long run.
During the last reported quarter, IBM’s Cognitive Solutions (solutions software and transaction processing software) revenues grew 1.4% on a year-over-year basis (up 2.2% at constant currency) to $5.30 billion.
Solutions software growth was driven primarily by analytics (Watson platform, Big Data, Information Integration).
At present, IBM carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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