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109-year-old IBM will split into two companies

Anna Savelyeva | 09.10.2020

By the end of 2021, the Managed Infrastructure Services division will be spun off into a public company with a new name.

According to IBM CEO Arvind Krishn, the new company will have annual revenues (about $ 19 billion) twice the size of its nearest competitor, thus making it a leader in managed infrastructure services. It also became known that it will have 90,000 employees, and the management structure will be determined in a few months.

While the new venture will design, manage and modernize the infrastructure of the world’s most important organizations, including multi-clouds, IBM itself will focus on an open hybrid cloud platform and artificial intelligence capabilities. By the time of the final split, the tax-free share will be transferred to the shareholders, but for some time the two companies will be paying the quarterly dividends together.

The division now provides technical support to 4,600 customers in 115 countries, including more than 75% of Fortune 100 organizations. The order book is $ 60 billion.

IBM expects that the hybrid cloud that the corporation plans to create in the future could be valued at $ 1 trillion. Krishna also noted that the cloud software portfolio will account for the majority of IBM’s revenues, while 60% of its revenues now come from services.

Recall that last July, IBM acquired Red Hat, which underlined its interest in this market segment, as the purchase was made with a tangible overpayment of $ 34 billion. Hat will provide customers with freedom, choice and flexibility, and will enable enterprises to securely deploy, run and manage data and applications both on-premises and in private and multiple public clouds.

IBM’s third-quarter revenue is expected to reach $ 17.6 billion and adjusted earnings per share of $ 2.58.

After the announcement of the split, IBM shares rose 8.8%.

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