IBM to Spin Off Legacy IT Unit to Focus Entirely on Cloud and AI
IBM separates its Managed Infrastructure Services unit into a new public company to prioritize its high-margin hybrid cloud and AI operations. The strategic shift sends shares up nearly six percent.
IBM announces a major structural change by spinning off its Managed Infrastructure Services unit into a new, separate publicly traded company. This move allows the tech giant to shed legacy operations and concentrate entirely on its open hybrid cloud platform and artificial intelligence capabilities. Investors respond positively to the news, pushing IBM shares up nearly six percent.
The newly formed entity, temporarily called NewCo, officially launches by the end of 2021 and focuses on managing and modernizing client-owned infrastructures. IBM identifies this specific market as a massive $500 billion opportunity. Following the separation, IBM's software and solutions portfolio accounts for the majority of the company's total revenue.
CEO Arvind Krishna explains that the successful integration of the $34 billion Red Hat acquisition gives IBM the confidence to execute this significant shift in its business model. The cloud division currently generates strong revenue, while the legacy infrastructure unit being spun out experiences an eight percent drop in sales. This strategic split creates financial flexibility and puts both companies on improved growth trajectories.