IBM to break up 109-year old company to focus on cloud growth

Tech giant IBM plans to split up its businesses into two public companies to focus on cloud computing, according to a statement. IBM will separate its Managed Infrastructure Services unit of its Global Technology Services division into a new public company. This creates two industry-leading companies, each with a strategic focus and flexibility to drive client and shareholder value. "IBM is laser-focused on the $1 trillion hybrid cloud opportunity," said Arvind Krishna, IBM Chief Executive Officer.

IBM will focus on its open hybrid cloud platform, which represents a $1 trillion market opportunity. IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions. IBM will also have more than 50% of its portfolio in recurring revenues.

 The new unit serves 4,600 clients in 115 countries and has an order backlog of $60 billion, according to a statement. The new company will be entirely focused on managing and modernizing client-owned infrastructures, a $500 billion market opportunity. It will leverage its expertise to offer hosting and network services, services management, infrastructure modernization, and migrating and managing multi-cloud environments.

"We have positioned IBM for the new era of hybrid cloud," said Ginni Rometty, IBM Executive Chairman. As two independent companies, IBM and NewCo will capitalize on their respective strengths. IBM will accelerate clients' digital transformation journeys, and NewCo will accelerate clients' infrastructure modernization efforts. This focus will result in greater value, increased innovation, and faster execution for our clients."

 IBM expects to report revenue of $17.6 billion, GAAP diluted earnings per share from continuing operations of $1.89, and operating (non-GAAP) earnings per share of $2.58.