IBM to break up company to focus on cloud computing after 109 years, 'landmark day' says CEO

International Business Machines Corp. plans to split up its businesses into two public companies to focus on high-margin cloud computing the company said. IBM will list its information technology infrastructure services unit as a separate company with a new name by the end of 2021. The new unit, now part of its global technology services division, serves 4,600 clients and has an order backlog of $60 billion, according to a statement.

“Today is a landmark day for our company,” Arvind Krishna, chief executive officer, IBM said on a call with analysts. “We are redefining the future of IBM.”

The spin-off is Krishna’s biggest attempt to revive IBM, which is hanging its future on cloud computing, aiming to become the leader in hybrid-cloud software. "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

"The infrastructure firm will have greater agility to design, run and modernize the infrastructure of the world's most important organizations," Krishna added.

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 said IBM's software and solutions portfolio will account for the majority of company revenue after the separation.

"We have positioned IBM for the new era of hybrid cloud," said IBM executive chairman Ginni Rometty. "This focus will result in greater value, increased innovation, and faster execution for our clients," Rometty said.

IBM’s services business has been struggling, as many of its clients delayed purchases of information technology or software upgrades to focus on short-term stability and cash preservation to survive the pandemic. It has also cut thousands of jobs this year as it reshapes the business.

After separation, the companies together are initially expected to pay a combined quarterly dividend that is no less than IBM’s pre-spin dividend per share, according to the statement.

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.

(With inputs from agencies)