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

(Reuters) – International Business Machines Corp is splitting itself into two public companies, capping a years-long effort by the world’s first big computing firm to diversify away from its legacy businesses to focus on high-margin cloud computing.

FILE PHOTO: Man stands near an IBM logo at the Mobile World Congress in Barcelona

IBM will list its IT infrastructure services unit, which provides outsourcing services including technical support for data centers, as a separate company with a new name by the end of 2021.

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Investors cheered the move by Chief Executive Officer Arvind Krishna, who also engineered the $34 billion Red Hat deal for the 109-year old company last year, sending shares up nearly 11% in premarket trading.

IBM has shifted focus to cloud growth in recent years, aiming to make up for slowing software sales and seasonal demand for its mainframe servers.

Krishna, who took over as chief executive officer from Ginni Rometty in April, said IBM’s software and solutions portfolio will account for the majority of company revenue after the separation.

“The success we’ve had with Red Hat gives us confidence that this is the right move,” Krishna said, calling the move a “significant shift” in the company’s business model.

IBM also said it expected third-quarter revenue of $17.6 billion and an adjusted profit per share of $2.58, in line with Street estimates.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Ramakrishnan M.)

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