iNDICA NEWS BUREAU-
In a historic and unprecedented move, the American technology behemoth IBM announced today that it plans to split up its business into two public companies.
The company said it aims to focus on high-margin cloud computing and will list its information technology infrastructure services unit as a separate company with a new name by the end of 2021.
The new unit, now part of its global technology services division, serves 4,600 clients and has an order backlog of $60 billion, according to a statement.
Investors cheered the move by Chief Executive Officer Arvind Krishna, who also engineered the $34 billion Red Hat deal for the 109-year old company last year, sending shares up nearly 11% in premarket trading.
“Today is a landmark day for our company,” Arvind Krishna, chief executive officer, IBM said on a call with analysts. “We are redefining the future of IBM.”
The spin-off is Krishna’s biggest attempt to revive IBM, which is hanging its future on cloud computing, aiming to become the leader in hybrid-cloud software and services that let clients store data in private servers and in public clouds, including those run by rivals Amazon.com Inc. and Microsoft Corp.
IBM has shifted focus to cloud growth in recent years, aiming to make up for slowing software sales and seasonal demand for its mainframe servers. Krishna said IBM’s software and solutions portfolio will account for the majority of company revenue after the separation.
IBM’s services business has been struggling, as many of its clients delayed purchases of information technology or software upgrades to focus on short-term stability and cash preservation to survive the pandemic. It has also cut thousands of jobs this year as it reshapes the business.
After separation, the companies together are initially expected to pay a combined quarterly dividend that is no less than IBM’s pre-spin dividend per share, according to the statement.
IBM also said it expected third-quarter revenue of $17.6 billion and an adjusted profit per share of $2.58, in line with Street estimates.