A Smart move by IBM buds the 'NewCo', the Cloud Child

Business
Oct 10 2020 03:45 PM
News Track

A Smart move by IBM buds the 'NewCo', the Cloud Child

The 109-year-old company IBM has announced the news about the split off this week, following CEO Arvind Krishna’s long-term plan to streamline the sprawling business. The new IBM “NewCo” will be focused on its hybrid cloud platform, which the firm estimates to represents a $1 trillion market opportunity. The cloud market is dominated by Amazon, aws and Microsoft Azure, but continues to see strong growth, particularly as the global pandemic encourages remote work.

“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,” said Krishna. The company has its placeholder name as “NewCo” in official documents roughly providing employment to 90,000 employees and $19 billion in revenue. IBM as it current stands has roughly 352,000 workers. Once the split-off is over as per estimation in December 2021, NewCo will be the world’s “leading managed infrastructure services provider,” with a client list of some 4,600 customers that covers more than 75 percent of the Fortune 100.

“With tighter integration and focus on its open hybrid cloud and AI solutions, 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,” said IBM in a press release. Market analyst Moshe Katri of Wedbush Securities said the split was a smart move. “IBM is essentially getting rid of a shrinking, low-margin operation given the cannibalizing impact of automation and cloud, masking stronger growth for the rest of the operation,” said Katri. Krishna takes his position as CEO in April 2020. He was the energy behind $34 billion acquisition of open source software firm Red Hat. Red Hat’s software is the key to IBM’s new hybrid cloud offerings.