International Business Machines (IBM) is splitting its 109 years old company into two public companies, after a years-long struggle by the world’s first computing company to change its legacy businesses in order to focus on high-margin cloud computing.
IBM Splits its 109 Years old Company to Focus on Cloud Growth
The company will list its IT infrastructure services unit, which renders technical support for more than 4,500 clients in nearly115 countries and has a reserve of $60 billion, as a separate company with a different name by the end of next year. According to the experts, it would require almost $5 billion in revenue for the separation and operational changes. In a blog, CEO Arvind Krishna called the move a “significant shift” in the 109-year-old company’s business model.
In an interview with Reuters, the chief financial officer James Kavanaugh said that the new firm will have 90,000+ employees and its administration structure will be determined in the upcoming few months.
Investors lauded the surprise move taken the by Chief Executive Officer Arvind Krishna who is the key architect behind IBM’s $34 billion procurement of cloud company Red Hat last year. Due to which, the company’s shares rose by 7% in the previous fiscal year.
The Chief Executive Officer Arvind Krishna told analysts,
We divested networking back in the ‘90s, we divested PCs back in the 2000s, we divested semiconductors about five years ago because all of them didn’t necessarily play into the integrated value proposition.
On the development, Wedbush Securities analyst Moshe Katri said,
IBM is essentially getting rid of a shrinking, low-margin operation given the cannibalising impact of automation and cloud, masking stronger growth for the rest of the operation.