IBM will spin off legacy business to focus on cloud and AI services

From The Verge: IBM is splitting into two public companies, with a spin-off handling the firm’s legacy IT infrastructure work, allowing IBM to focus on new high-margin businesses, particularly cloud services and AI.

The 109-year-old company announced the news this week, which follows CEO Arvind Krishna’s longterm plan to streamline the sprawling business. Krishna took the reins of IBM in April 2020 after working on its $34 billion acquisition of open source software firm Red Hat from 2018 onwards. Red Hat’s software is key to IBM’s new hybrid cloud offerings.

In a call with analysts, Krishna presented the split as the latest in a long line of divestments by IBM, as the company has sought to find more profitable ground throughout its long history. “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,” said Krishna, according to a report from Reuters.

The new company — which has the placeholder name “NewCo” in official documents — will have roughly 90,000 employees and $19 billion in revenue. (IBM as it current stands has roughly 352,000 workers.) When the spin-off is completed, which IBM says will take place before the end of 2021, NewCo will automatically become the world’s “leading managed infrastructure services provider,” with a client list of some 4,600 customers that covers more than 75 percent of the Fortune 100.

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