IBM announces a split

International Business Machines (IBM) has announced a strategic business development. What is this all about?

International Business Machines (IBM) has announced it will split into two public companies. The move is an attempt to shift its focus to higher-margin businesses like cloud computing and artificial intelligence.

IBM’s legacy businesses will be spun off into a new company called NewCo. This will encompass its “Managed Infrastructure Services” division.

“NewCo,” the spun-off company from Big Blue’s Global Technology Services business, will focus on modernizing customers’ legacy infrastructure and moving it to the cloud. The remaining company, still named IBM, will accelerate its focus on its open hybrid cloud platform and Artificial Intelligence (AI).

This move marks the latest shift by the world’s first big computing firm to diversify away from its traditional businesses.

“We divested networking back in the 1990s, 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,” Chief Executive Arvind Krishna said.

Mr Krishna said NewCo will have $19bn in annual revenue and will serve 75% of Fortune 100 companies when it makes its share market debut.

NewCo will have 90,000 employees and will receive a permanent name next year, along with a share market listing.

“IBM is essentially getting rid of a shrinking, low-margin operation given the cannibalizing impact of automation and cloud, masking stronger growth for the rest of the operation,” Wedbush Securities analyst Moshe Katri said.

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