IBM plans to spin off its infrastructure services business into a separate company, as it moves away from its origins managing information technology hardware for clients and towards the fast-growing cloud computing sector.
The company said it would create an independent “NewCo” next year for its managed infrastructure services business, which will have more than $19bn in annual revenues and remain IBM’s “preferred partner” for infrastructure.
IBM’s announcement came one year after it acquired the open-source software business Red Hat for $34bn, as it looks to transition more of its business to cloud services.
“I am excited about the path ahead and the tremendous value we will create by having two companies focused on what they do best,” IBM chief executive Arvind Krishna said in a statement. “This will benefit our clients, employees, and shareholders and place both IBM and NewCo on an improved growth trajectory.”
The decision comes as IBM attempts to focus on so-called hybrid cloud services under Mr Krishna, who was promoted to chief executive in April. Hybrid cloud refers to a mix of public cloud services and on-premise data storage.
IBM’s sales have flagged in the past decade as the company ceded ground to Amazon and Microsoft in the burgeoning cloud sector, where customers rent computing power instead of purchasing it. The company’s software and solutions businesses will account for the majority of its revenue after the spinout, Mr Krishna said.
On Thursday, IBM also reported preliminary third-quarter earnings results, projecting revenues of $17.6bn that were in line with analyst estimates.
Shares in IBM opened more than 8 per cent higher in early trading on Thursday as investors cheered the announcement.
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October 08, 2020 at 09:17PM
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IBM to spin off legacy business to focus on cloud computing - Financial Times
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