IBM jumps 9% after it reveals plan to spin off legacy business to focus on cloud unit
IBMsurged on Thursday after it announced plans to spin off its legacy managed-infrastructure business so it can focus on building up its clouddivision.
- The spinoff is expected to be tax-free for IBM shareholders and be completed by the end of 2021, the company said.
- CEO Arvind Krishna said the spinoff would allow IBM to be "laser-focused on the $1 trillion hybrid cloud opportunity."
- IBM also released preliminary third-quarter earnings results.
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IBM said it would spin off its managed-infrastructure business as a new publicly traded company in a tax-free deal for IBM shareholders. The spinoff is expected to be completed by the end of 2021, it said.
CEO Arvind Krishna said that spinning off the company's legacy networking business would allow it to be "laser-focused on the $1 trillion hybrid cloud opportunity."
The deal follows IBM's acquisition of RedHat for $34 billion in 2019 to bolster its cloud offering.
"Now is the right time to create two market-leading companies focused on what they do best," Krishna said.
IBM said that as it focuses on growing its cloud business, it will have "an enhanced financial profile with a clear trajectory for improved revenue and profit growth."
News of the spinoff was well received by investors, with shares of IBM surging as much as 9% on Thursday.
IBM also released preliminary third-quarter earnings results. The company expects to report revenue of $17.6 billion and adjusted earnings per share of $2.58. That would beat analysts' revenue estimates of $17.5 billion and meet earnings-per-share expectations.
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