On my first day as CEO, I made a commitment to the growth of IBM. I stated that a maniacal focus on our open hybrid cloud platform and AI capabilities is key to this outcome. Day by day, product by product, project by project--we are dedicated to helping our clients unlock the immense value this represents. Building on the solid foundation Ginni has put in place, we are focused on accelerating our growth strategy and seizing the $1 trillion hybrid cloud opportunity. As we work toward this goal, two things are becoming increasingly clear.
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.
IBM announced that it plans to spin off its $19 billion managed infrastructure services unit into a separate company by the end of next year. Arvind Krishna, the CEO, said that the spin-off would free up IBM so the parent company can focus on higher margins and higher growth in the hybrid cloud market. The company's focus needs this narrowed vision, as Krishna believes that IBM will be on a better revenue growth trajectory as it chases the $1 trillion hybrid-cloud goal. "IBM has always transformed to fit the times and help clients move from one technological phase to the next," he wrote in a blog post. Arvind believes that the ultimate IBM goal is the through-line that connects all the significant moments that mark its history.
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 named Martin Schroeter as the chief executive of the firm's new managed infrastructure business unit. Announced on Thursday, IBM said Schroeter will take on the role of CEO at NewCo, a proposed spinoff and separation of the tech giant's managed infrastructure services business. Effective January 15, Schroeter will be responsible for leading the NewCo public company, which will manage data centers and cloud infrastructure for clients. Schroeter has previously served as IBM's senior VP of Global Markets and also acted as chief financial officer (CFO) between 2014 and 2017, managing an asset base of over $37 billion, before leaving IBM in June 2020. Now, upon his return, Schroeter will focus on developing the spinoff company, giving IBM the opportunity to focus on its cloud business.