IBM Moving Further Towards Cloud, AI Services

IBM has announced that it is shifting its business to focus on open hybrid cloud and AI solutions, which will account for more than half of its recurring revenues. As a result, the company has announced that it is separating the Managed Infrastructure Services unit of its Global Technology Services division into a new public company.

"IBM is laser-focused on the $1 trillion hybrid cloud opportunity," said Arvind Krishna, IBM Chief Executive Officer. "Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best.”

He added on a call with analysts that the company has a history of parting ways with dated technology, divesting networking back in the ‘90s, PCs in the 2000s, and semiconductors about five years ago.

With this new plan, IBM will focus on its open hybrid cloud platform and AI capabilities. The company recently acquired Red Hat for $34 billion in an effort to help clients further accelerate adoption of the cloud platform, including the deployment of powerful AI capabilities to enable the power of data, application modernization services, and systems.

The new company—which will be named at a later date—will focus on managing and modernizing client-owned infrastructures, offering hosting and network services, services management, infrastructure modernization, and migrating and managing for multi-cloud environments. The new company already has relationships with more than 4,600 clients in 115 countries, including more than 75% of the Fortune 100 and a backlog of $60 billion.

The news sent IBM’s shares up 7%. The company also revealed that it expects to report Q3 revenue of $17.6 billion, GAAP diluted earnings per share from continuing operations of $1.89 and operating (non-GAAP) earnings per share of $2.58. These numbers are roughly in line with analysts’ predictions.