International Business Machines (NYSE: IBM) announced its cloud and artificial intelligence (AI) segments will split into two companies, furthering its growth strategy. IBM shares closed nearly 6% higher on the news.
What Companies is IBM Spinning Off?
Moving away from legacy services, IBM purchased cloud computing company Red Hat for $34 billion in 2019. Cloud revenue was $23 billion which was 30% of total revenue. IMB made this shift because cloud computing is a higher margin business.
IBM’s global technology services (GTS) portion will fold into a new public company called NewCo. The company will focus on hybrid cloud and AI.
“IBM is laser-focused on the $1 trillion hybrid cloud opportunity,” said Arvind Krishna, IBM Chief Executive Officer. “Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. 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. 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.” Source: IBM
Image Credit: IBM