(Bloomberg) — Palantir Technologies Inc. and International Business Machines Corp. are uniting in a partnership that will dramatically expand the reach of Palantir’s sales force while making IBM’s own artificial-intelligence software easier for non-technical customers to use, the companies plan to announce Monday.
The global partnership is the largest of its kind for Palantir, the maker of data-analysis software whose shares have more than quadrupled since its September debut on the New York Stock Exchange. Palantir gains access to a sales team of more than 2,500 people, up from its current 30. Palantir’s stock rose 10% as trading opened in New York Monday, boosting the shares to $37.53.
The relationship is the payday for the project Palantir started more than a year ago to break its data integration and analysis software into smaller, less pricey modules. The Denver-based company mainly sells to companies with revenue in excess of $500 million — many of which already have relationships with IBM.
Reselling Palantir’s software to augment the data and AI tools that IBM already offers and make them easier for more people to use was “a natural” fit, said Rob Thomas, IBM’s senior vice president of software, cloud and data. “We’re going to sell it to 180 countries and thousands of customers.”
Palantir’s software requires little to no coding, enabling less technical employees to use it, Thomas said. To expand IBM’s cloud and AI business, half the revenue will need to come through partnerships like the one struck with Palantir. “That’s a pretty fundamental change for us,” he said.
Expanded Access
Without providing a time frame, Thomas said he expects the partnership to help boost IBM’s customers using AI to 80% from its current 20%.
Palantir Chief Operating Officer Shyam Sankar said the technical fit with IBM and its reach are part of his company’s long-term effort to finally ramp sales. In addition to commercial customers, government contracts have surged both in number and size during the pandemic.
“This is the biggest [partnership[ we’ve announced — expect more,” Sankar said. He said he expects to triple Palantir’s direct-sales team to about 100 this year, a significant hike for a company whose management once prided itself on not employing a single salesperson.
Started with funding from PayPal co-founder Peter Thiel in 2003, Palantir found early success with users at the U.S. Central Intelligence Agency and went on to sign the Defense Department and Internal Revenue Service, which, respectively, have used the software to locate roadside bombs and hunt tax cheats.
Government Contracts
More recently the U.S. Department of Health and Human Services and the Centers for Disease Control and Prevention use Palantir’s software to help predict Covid-19 outbreaks, distribute protective gear and allocate vaccines.
While Palantir’s government contracts have grown — sometimes amid privacy and surveillance concerns — the company’s commercial business has been slower to evolve.
Palantir last reported 132 total government and commercial clients, a concentrated pool that includes BP Plc, Merck KGaA and Airbus SE. Early customers like American Express Co. and Coca-Cola Co. which experimented with low-cost Palantir software trials and later ditched them, aren’t necessarily top of Palantir’s list now, Sankar said.
“We hope to win all this business back in the fullness of time,” Sankar said, adding there is no “pride list” of former customers it hopes to now re-engage.
Palantir reports financial results for 2020 on Feb. 16. A shareholder lockup expires three days later, unleashing the remaining 80% of all shares that have not been eligible to trade. Palantir shares rose $2 to $34.05 on Feb. 5, giving it a stock-market value of $59.3 billion.
(Updates with shares in the second paragraph.)
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