IBM Restructures To Concentrate On The Cloud

International Business Machines (IBM) is splitting-up the 109 -year-old corporation into two public companies to help them focus on high-margin cloud computing. IBM will list its IT infrastructure services unit, which provides technical support for 4,600 clients in 115 countries and has a backlog of $60 billion, as a separate company with a new name by the end of 2021.

The expansion into cloud computing has accelerated following the $34billion acquisition of RedHat two tears ago. IBM said it expects to record nearly $5 billion in expenses related to the separation and operational changes and the new company will have 90,000 employees and its leadership structure still to will be decided. 

“Today is a landmark day for our company....We are redefining the future of IBM....We divested networking back in the ‘90s, 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,” IBM CEO Arvind Krishna said.

IBM will now focus on open hybrid cloud and AI solutions that will account for more than half of its recurring revenues.

Cloud computing involves using the power of the Internet to outsource tasks you might traditionally perform on a personal computer, anything from handling simple storage to complex development and processing, to a vast and powerful remote network of inter-connected machines. Information and data is stored on physical or virtual servers, which are maintained and controlled by a cloud computing provider, including Amazon and their AWS product and Microsoft's Azure.

Krishna,said IBM’s software and solutions portfolio would account for the majority of company revenue after the separation. The company also said it expects third-quarter revenue of $17.6 billion and an adjusted profit per share of $2.58, roughly in line with Street estimates.

IBM has recently shifted focus to cloud growth aiming to make up for slowing software sales and is planning to position the business for the new era of hybrid cloud.

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