IBM is planning to split into two individual companies by 2021. This initiative is taken as a shift towards higher-margin businesses like cloud computing and artificial intelligence. After the announcement of this news by IBM, its shares closed 6% higher.
IBM is the world’s first computing company and it has been in operation from centuries. Since the world is moving more towards cloud computing and artificial intelligence has made its presence in almost all sectors, be it corporate, education, Healthcare, businesses etc, this move is deemed wise.
IBM also acquired Red Hat which is a cloud company worth $34bn. Right now Amazon web services and Microsoft are the market leaders of cloud service providers. arvind Krishna chief executive of IBM says that hybrid cloud and artificial intelligence are fast becoming the epicentre of Commerce transactions and Computing itself. It is a driver of growth in the world and the strategy of IBM must derive from the present world. It also considers the future of IBM’s clients and hence this news was announced.
Right now IBM has 352000 employees and this move will cost around $5bn. The new company will be named as NewCo and will cover the Managed Infrastructure Services. This aspect of the company will be more profit-seeking business and expects to create $19bn annual revenue. The company will also serve 75% of Fortune 100 companies and that new company will have around 90,000 new employees.
The 109-year-old company has been planning this move from a long time, changing its strategic path from conventional computer making towards a more robust line of cloud computing and AI, which are massive hits and in major demand all over the world, across all sectors. Krishna also says that one-third of Indian employees working in the firm will be moved to the new entity which is going to be NewCo.
Arvind Krishna had replaced Ginny Rometty as CEO in April this year and has brought significant change in what we see as IBM today as a company. Its move to diversify a portfolio and cater to newer and emerging markets is deemed wise. Many investors have given up a thumbs up and look forward to what the company offers in its novice venture.