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IBM to divide into two companies in strategy overhaul

The computing giant said a new company, centred on its legacy IT infrastructure business, will be unveiled next year and spun out from the existing firm

International Business Machines Corp. - IBM to divide into two companies in strategy overhaul

International Business Machines Corp (NYSE:IBM) has said it will split itself into two publicly-listed companies as part of an effort to shift towards its higher margin divisions such as cloud computing and artificial intelligence (AI).

In an announcement on Thursday, the computing giant said a new company, centred on legacy IT infrastructure, will be unveiled next year and spun out from the existing firm, a process that is expected to cost around US$5bn.

IT infrastructure, while making up around a quarter of the company’s revenues, is widely considered to be a key drag on the growth of the company’s other divisions.

The divestment strategy is spearheaded by IBM’s chief executive Arvind Krishna, who orchestrated the company’s acquisition of cloud computing firm Red Hat in 2019 for US$34bn.

It also marks an attempt by IBM to muscle in on the burgeoning cloud computing market, which is currently dominated by fellow tech giants Microsoft Corp (NYSE:MSFT) and Amazon Inc (NASDAQ:AMZN).

Meanwhile, the new spin out firm, currently dubbed NewCo, will receive a permanent name next year and is expected to have around 90,000 employees at its debut.

Quick facts: International Business Machines Corp.

Price: 123.16 USD

NYSE:IBM
Market: NYSE
Market Cap: $109.74 billion
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