IBM is splitting into two public companies, with a spin-off handling the firm's legacy IT infrastructure work, allowing IBM to focus on new high-margin businesses, particularly cloud services and AI. The 109-year-old company announced the news this week, which follows CEO Arvind Krishna's longterm plan to streamline the sprawling business. Krishna took the reins of IBM in April 2020 after working on its $34 billion acquisition of open source software firm Red Hat from 2018 onwards. Red Hat's software is key to IBM's new hybrid cloud offerings. In a call with analysts, Krishna presented the split as the latest in a long line of divestments by IBM, as the company has sought to find more profitable ground throughout its long history.
IBM has announced that it will be splitting the company into two in order to increase its revenue margins. According to a statement issued by CEO Arvind Krishna, the company is diversifying away from its traditional portfolio and growing its cloud computing service. A new company codenamed NewCo will be handling the spun-off business. IBM said the split will allow it to focus on areas with immense potential for growth. It has divulged that NewCo will be a new market leader in cloud IT-managed services right from the get-go.
IBM, a company that originally made its name out of its leadership in building myriad enterprise hardware (quite literally: its name is an abbreviation for International Business Machines), is taking one more step away from that legacy and deeper into the world of cloud services. The company today announced that it plans to spin off its managed infrastructure services unit as a separate public company, a $19 billion business in annual revenues, to help it focus more squarely on newer opportunities in hybrid cloud applications and artificial intelligence. Infrastructure services include a range of managed services based around legacy infrastructure and digital transformation related to it. It includes things like testing and assembly, but also product engineering and lab services, among other things. A spokesperson confirmed to me that the deal will not include the company's servers business, only infrastructure services.
International Business Machines (IBM), one of the most iconic names among American corporations, said it will split the company into two by the end of next year in order to focus on the growing and higher-margin cloud computing and artificial intelligence markets. IBM said it will spin off its legacy infrastructure services unit as a yet unnamed public company (NewCo), while the other company, the "new" IBM, will largely be engaged in the cloud and artificial intelligence businesses. IBM Chief Financial Officer James Kavanaugh told Reuters that the new company (NewCo) will have about 90,000 employees and its executive structure will be decided over the next few months. IBM said it expects to record almost $5 billion in expenses related to the separation. After the separation is completed, each company's dividend policy will be determined by its respective board of directors.
The cloud computing race in 2020 will have a definite multi-cloud spin. Here's a look at how the cloud leaders stack up, the hybrid market, and the SaaS players that run your company as well as their latest strategic moves. IBM said it will spin off its managed infrastructure services unit into a new public company so it can focus on its hybrid cloud business, which includes Red Hat. The new company, which will be tax free to shareholders, will focus on managing data centers and cloud infrastructure for clients. IBM also said it will report third quarter sales results better than expectations.