Article written by Tyler Durden, Zerohedge.com
IBM shares surged 12% in premarket trading on Thursday after the New York based company announced plans to spin off its $19 billion “managed infrastructure services” unit into its own public company, NewCo.
The spin off (which is said to be tax-free for US shareholders), comes as the pioneering computing company shifts its focus from the stumbling servers it provides and maintains for thousands of clients around the world to focus more on cloud computing, a business that is currently dominated by Amazon’s AWS.
News of the spinoff comes as IBM cuts thousands of jobs to accelerate the re-shaping of its business as the pandemic drives its customers to delay purchases of their information technology or software upgrades, and instead focus on their short-term financial survival as a result of the pandemic chaos.
CEO Arvind Krishna is under tremendous pressure to execute a major turnaround plan to try and revive IBM after the last decade saw the company shrink as newer rivals muscled in to the IT business and picked at their market share (such as Amazon and Microsoft).
Krishna said the split will help IBM focus on its cloud platform and artificial intelligence, two focus areas of growth for the company.
Despite the spin-off, both IBM and NewCo are expected to pay a combined dividend that is no less than IBM’s current dividend.
IBM’s annual revenue was $77.1 billion last year.
Works Cited:
https://ca.finance.yahoo.com/news/ibm-spin-off-19b-business-141310755.html