IBM breaks up into two companies - splitting into two market leading companies

Last week IBM announced that the company would be moving some of its lower-margin lines of business into a new company and that IBM itself would focus on higher-margin cloud services. This comes after a long effort by IBM to diversify away from its legacy businesses.

IBM will list its IT infrastructure services unit, which provides technical support for 4,600 clients in 115 countries as a separate company with a new name by the end of 2021. The new company will have 90,000 employees and its leadership structure will be decided in a few months. This new company has no official name yet and is referred to as NewCo in IBM's marketing and investor relations material..

In a press release IBM state that they "will focus on its open hybrid cloud platform, which represents a $1 trillion market opportunity," while NewCo "will immediately be the world’s leading managed infrastructure services provider."

During an investor call, CEO Arvind Krishna, who replaced Ginni Rometty as CEO in April, acknowledged that the move was a "significant shift" in how IBM will work, but he positioned it as the latest in a decades-long series of strategic divestment. Krishna also said that IBM’s software and solutions portfolio would account for the majority of company revenue after the separation.

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“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,” Krishna said on a call with analysts.

IBM, which currently has more than 352,000 workers, said it expects to record nearly $5 billion in expenses related to the separation and operational changes.