NEW YORK - International Business Machines or IBM is spinning off a slower-growth business that manages corporate computer systems so it can focus on the boom in demand for cloud services and step up competition with Amazon.com and Microsoft.
The move is the fourth major transformation for IBM in its 109-year history and is the first big move by chief executive officer Arvind Krishna, who took over from Ginni Rometty in April and has been pushing to revive growth after almost a decade of shrinking revenue. Mr Krishna earlier this year cut thousands of jobs as he began reshaping the business.
"Today is a landmark day for our company," Mr Krishna said on a call on Thursday."We are redefining the future of IBM." The new strategy will"unlock growth" on both sides of IBM's business, the CEO said, and predicted the deal would provide"sustainable mid-single digit revenue growth" at IBM in the medium term.
The new company will manage and modernize corporate clients' infrastructures, a US$500 billion market opportunity, using artificial intelligence and automation, according to IBM. The original IBM will focus on the"US$1 trillion hybrid-cloud opportunity," Mr Krishna said. IBM's large legacy of IT products has been a drag on growth, according to Bloomberg Intelligence analyst Anurag Rana."Unloading lower-growth businesses could unlock the true value of Red Hat, which we calculate at over US$50 billion," he said, adding that the spinoff is"exciting news for IBM." The move will make IBM more of a software company and less of a low-growth services vendor, possibly aiding its valuation, Rana said.
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