In a bid to cope with shifting market dynamics, IBM (International Business Machines) is to be split into two separate public entities.
The world’s first major name in computing IBM is making the move, seen by investors as a more than worthwhile effort to focus more on emerging sectors in high-end computing such as artificial intelligence (AI) and cloud computing, as it pushes to stay relevant in an increasingly profitable business sector.
Just a year ago IBM acquired cloud company Red Hat for around US$34 billion.
On the back of the announcement, IBM shares went up steadily to close 6% higher.
Speaking about the decision, IBM Chief Executive Arvind Krishna said “We divested networking back in the 1990s, we divested PCs back in the 2000s, we divested semiconductors about five years ago because all of them didn’t necessarily play into the integrated value proposition.”
Continuing “(To) drive growth, our strategy must be rooted in the reality of the world we live in and the future our clients strive to build. Today, hybrid cloud and AI are swiftly becoming the locus of commerce, transactions, and over time, of computing itself,” Mr Krishna is pushing for IBM to be able to compete with current cloud giants Amazon, Microsoft and Google.
Industry analyst from Wedbush Securities Moshe Kati was quoted as saying “IBM is essentially getting rid of a shrinking, low-margin operation given the cannibalizing impact of automation and cloud, masking stronger growth for the rest of the operation,” in the move that is expected to cost IBM around US$5 billion.