IBM has shocked the tech industry this week with the news that the 109 year tech veteran will be split into two separate companies.
Big Blue announced it will split off part of its business with $19 billion in annual revenues, so that it can focus on hybrid cloud and artificial intelligence going forward.
It will lop off its managed infrastructure services unit into a new public company, temporarily named ‘NewCo’, sometime in late 2021.
IBM’s managed infrastructure services operation mostly provides a range of managed services (surprise surprise) based around legacy infrastructure and digital transformation. It including services for a range of issues, such as technical support for data centres, backup services, and security services.
However it is more than just a services outfit, as it includes testing and assembly, product engineering and lab services, among other things.
And this is not a small unit either. Indeed, ‘NewCo’ will reportedly have 90,000 employees, as well as 4,600 big enterprise clients spread across 115 countries. It will compete against the likes of Microsoft, BMC and others.
This spin out will leave the remaining part of IBM with $59 billion in annual revenues.
It is certainly a very bold move for IBM CEO Arvind Krishna, who has only been in the job since February this year.
“IBM is laser-focused on the $1 trillion hybrid cloud opportunity,” Krishna said. “Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating.”
“Now is the right time to create two market-leading companies focused on what they do best,” said Krishna. “IBM will focus on its open hybrid cloud platform and AI capabilities.”
“NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organisations,” he added. “Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders.”
Krishna took over the top job from Ginni Rometty, who is a IBM veteran with nearly 40 years at the firm. She has overseen a period of great change at IBM, ever since she took over the CEO role back in 2012, becoming the first woman to be in charge of the founding firm of the IT industry.
For most of her tenure, Rometty followed a policy that saw IBM shrinking “by design”, as part of its refocusing on the cloud and analytics, and move away from its hardware heritage.
Krishna intends to shrink things even more at IBM, but it seems the stock market liked the move, and shares in IBM were up 7 percent in early trading.
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