IBM continues to thin its software portfolio with the sale of its declining mortgage services product

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IBM continues to thin its software portfolio with the sale of its declining mortgage services product

GinniRometty2016

AP

IBM CEO Ginni Rometty is selling off low-margin software assets.

  • IBM sold its Seterus mortgage services business to Mr. Cooper Group, the companies announced Friday.
  • The terms of the deal weren't disclosed, though IBM said that Seterus brought in $200 million in annual revenue.
  • That revenue was declining and had a lower gross profit margin than the rest of IBM's Global Business Unit.
  • IBM is on a mission to rid its portfolio of low-margin assets.

IBM continued its effort to prune its software portfolio of low-margin products with the sale of its mortgage servicing business to Mr. Cooper Group.

The terms of the deal, announced Friday, were not disclosed. IBM said in a statement that this business generated $200 million in revenue in 2018, though the revenue was declining and the gross margin was below IBM's overall gross margin for Global Business Services which was 29.8% in the first three quarters of 2018.

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"Because the revenue has been declining, this transaction modestly improves Global Business Services revenue trajectory and margin profile," IBM said.

IBM acquired its Seterus mortgage servicing business during the 2008 financial crisis "to help a client manage a broad mortgage portfolio, including high risk loans," according to a statement.

"IBM was successful in the mortgage servicing work, and the portfolio is now much more stable," according to the statement. "The time is now right to divest this business to a mortgage servicing specialist, whose domain-specific expertise and scale can further advance this business."

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The buyer Mr. Cooper Group, formerly known as Nationstar Mortgage Holdings, is a mortgage origination and services business.

It's all part of the plan

IBM is on a mission to rid its portfolio of low-growth or declining businesses as part of its push toward a "high-value model." This essentially means the company would rather invest in higher-yield emerging areas such as AI, cloud, and blockchain than figure out a way to help its declining businesses grow.

IBM's overall revenues declined for nearly six years, before returning to growth in 2018.

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Last month, the company sold $1.8 billion in software assets from its Cognitive Solutions segment to the Indian company HCL.

It has similarly sold off low-performing software units for each of the past 14 years.

IBM traded up nearly 4% Friday amid a broad market rebound.

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Read more:Here's why IBM just sold a $1.8 billion chunk of its software business to the Indian IT company HCL

Get the latest IBM stock price here.

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