The IT services unit of IBM’s Global Technology Services business will become a separate public company. It represents a major departure from IBM’s previous priorities and one of the boldest moves in the company’s more-than-a-century-long history.
IBM’s managed infrastructure services business represented nearly a quarter of IBM’s revenue last year. But IBM believes its future lies in the hybrid cloud — a technical setup wherein companies may use multiple clouds in addition to their own on-premises servers. IBM’s platform gives companies tools to more easily navigate between those various environments.
Investors liked the news, sending shares of IBM up 5% Thursday.
“Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities,” said IBM CEO, Arvind Krishna. “NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities — creating value for clients and shareholders.”
The company also reported preliminary third quarter earnings results Thursday. IBM says it expects to report revenue of $17.6 billion and adjusted earnings per share of $2.58. The computing firm is set to report earnings, later this month, on October 21.
The spinoff, tenatively named NewCo, is expected to be tax-free and completed by the end of 2021.