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IBM jumps 9% after it reveals plan to spin off legacy business to focus on cloud unit

Business Insider logo Business Insider 10/8/2020 mfox@businessinsider.com (Matthew Fox)
a man looking at the camera: Reuters © Reuters Reuters
  • IBM surged on Thursday after it announced plans to spin off its legacy managed-infrastructure business so it can focus on building up its cloud division.
  • 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.
  • Visit Business Insider's homepage for more stories.

IBM is shedding its legacy business to focus on growing its cloud unit, it said on Thursday.

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.


Video: IBM CEO and executive chair on spinning off IT infrastructure unit (CNBC)

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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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