Tech giant IBM has decided to spin off the IT services unit of its Global Technology Services business to focus on hybrid cloud computing.
IBM announced that the IT services unit, which comprise nearly a quarter of its revenue, will be spun off to become a separate public company in order to focus on new opportunities in hybrid cloud computing.
Betting on hybrid cloud
While IBM's managed infrastructure services business represented almost 25% of its revenue last year, the company believes in the potential of the hybrid cloud, a technical setup wherein firms may use multiple clouds in addition to their own on-premises servers.
The tech firm's platform provides tools that allow clients to more easily navigate between those different environments.
The focus on hybrid cloud was initiated by new IBM chief executive officer (CEO) Arvind Krishna when he took over the leadership from Ginni Rometty earlier this year. Krishna formerly served as senior vice president for cloud and cognitive software.
In the past several years, IBM has been investing heavily in cloud computing, including its acquisition of RedHat in 2019 for $34 billion. Red hat CEO Jim Whitehurst, who was expected to succeed Rometty, became IBM president.
According to the company, the spinoff, tentatively named NewCo, will give IBM the opportunity to be "laser-focused on the $1 trillion hybrid cloud opportunity." Following news of the spinoff, shares of IBM went up by 5% on Thursday.
Krishna said: "Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities."
"NewCo will have greater agility to design, run and modernize the infrastructure of the world's most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities -- creating value for clients and shareholders," he explained.
In its preliminary third quarter earnings results, the company said it expects to report revenue of $17.6 billion and adjusted earnings per share of $2.58.
Other IBM highlights for the year
In March, the company partnered with the White House Office of Science and Technology Policy and the Department of Energy to form the COVID-19 High Performance Computing Consortium, to provide increased access to supercomputers for coronavirus research.
Director of IBM Research Dario Gil said: "How can we find new treatments? Or ultimately vaccines and a cure?" "Those are the areas we’ll be looking at … We’re going to bring an unprecedented amount of computing power" to address coronavirus, he added.
In June, IBM announced that it will stop providing biased facial recognition technology for "mass surveillance or racial profiling".
The decision of IBM to stop offering its facial recognition technology came after a series of protests across the US calling for police reform following the death of a black man, George Floyd, in police custody.
IBM wrote a letter to the US Congress, saying AI systems used in law enforcement needed to be tested "for bias".
In the letter, the IBM chief claimed that the "fight against racism is as urgent as ever", identifying three areas where the company wanted to work with Congress. These are police reform, responsible use of technology, and broadening skills and educational opportunities.
