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IBM said Thursday that it would spin off its IT infrastructure unit to focus more on cloud computing, a high-margin business that has seen momentum as companies increasingly accelerate their digital shift.
The company’s shares rose nearly 14% in premarket trading.
IBM has trimmed its legacy businesses over the years to focus on the cloud, aiming to offset slower software sales and seasonal demand for its mainframe servers.
Arvind Krishna, who took over as CEO of Ginni Rometty in April, said that IBM’s software and solutions portfolio will account for the majority of the company’s revenue after the split.
Krishna is known as the “lead architect” of IBM’s largest acquisition, the software company Red Hat, which he bought for $ 34 billion last year.
‘Significant change’
“The success we have had with Red Hat gives us confidence that this is the right move,” Krishna said, calling the move a “significant change” in the company’s business model.
The spin-off of the new company, a tax-free spin-off for shareholders, will be completed by the end of 2021, IBM said.
IBM also said it expected third-quarter revenue of $ 17.6 billion and adjusted earnings per share of $ 2.58, in line with Wall Street estimates. – Reported by Munsif Vengattil, (c) 2020 Reuters
