The 109-year-old company is splitting into two public companies, with a spin-off handling the firm’s legacy IT infrastructure work, and allowing IBM to focus on new high-margin businesses, particularly cloud services and AI.
The IBM shares closed nearly 6% higher after the announcement.
This is IBM’s latest shift to diversify away from its traditional businesses.
IBM, which currently has more than 352,000 workers, expects the separation will
cost $5bn.
The new company will be called NewCo for now and will receive a permanent name next year. Its annual revenues will be $19bn, will serve 75% of Fortune 100 companies and will have 90,000 employees-
Chief Executive Arvind Krishna was the key architect behind IBM’s $34bn
(£26bn) acquisition of cloud company Red Hat last year.
“To drive growth, our strategy must be rooted in the reality of the
world we live in. Today, hybrid cloud and AI are swiftly becoming the locus of
commerce, transactions, and over time, of computing itself,” Mr Krishna wrote
in a blog post.
The new IBM will be mostly focused on its hybrid cloud platform, which represents a $1 trillion market opportunity. Right now, the cloud market is dominated by Amazon and Microsoft, but continues to see strong growth, particularly as the global pandemic encourages remote work.
“With tighter integration and focus on its open hybrid cloud and AI solutions, IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions,” said IBM in a press release.
