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IBM, which provides computing-related products and services, has announced that it will spin off its cloud business and infrastructure services business at the end of 2021.
It announced that it would operate as a separate company by dividing the high-profit cloud business and the low-profit infrastructure service business. Arvind Krishna, IBM CEO, stressed the spin-off at an investor conference as an important change. He explained that IBM sold its network business in the 1990s and the PC business in the 2000s, and sold it five years ago in 2014 because the semiconductor business did not meet its integrated value proposition. So far, IBM has said that it has sold businesses that have been an obstacle to its business.
After the spin-off, IBM can do the high-margin cloud business as it is, but another company will take over the low-margin infrastructure service business. There is no official name for the new company yet, only the new company (NewCo) is written. The spin-off is expected to bring IBM revenues to $59 billion and new corporate revenues to $19 billion.
Regarding the spin-off, IBM explains that the new IBM, which will take over the cloud business, will focus on an open hybrid cloud platform with a market size of $1 trillion and the new company will become the world’s top infrastructure service provider. The new company will also own all of IBM Global Technology Services’ existing infrastructure clients, meaning that 75% of Fortune 100 companies will be customers.
Analysts say IBM is essentially withdrawing from its low-margin business and is pursuing strong growth in the rest of its businesses. Currently, IBM has 350,000 employees, but the spin-off will take place in 2021 and the new company will employ 90,000. Related information can be found here.
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