IBM to Spin Off Managed Infrastructure Services Unit Into New Public Company

By Dave Sebastian

International Business Machines Corp. said it will spin off its managed infrastructure services unit, currently part of its global technology services division, into a new public company, as part of its hybrid cloud strategy.

Shares rose 3.2% in premarket trading.

The new company, which IBM will name at a later date, will offer hosting and network services, services management, infrastructure mode and migration and management of multi-cloud environments, IBM said Thursday.

IBM said the separation, expected to be tax-free to shareholders, would simplify its operations. The two entities are expected to initially pay a combined quarterly dividend of at least IBM's per-share dividend before the spin off, IBM said. The transaction is expected to close by the end of 2021.

The managed infrastructure services unit has relationships with 4,600 clients in 115 countries, operating in what IBM sees as a $500 billion market opportunity. The spun off unit will focus on artificial intelligence and automation, helping enterprises make their infrastructures more efficient, IBM said. IBM said the new company will be able to partner across all cloud vendors and add investment, meaning more opportunity for profit growth and cash generation.

The company Thursday also posted preliminary third-quarter earnings from continuing operations of $1.89 a share, or $2.58 a share on an adjusted basis, on revenue of $17.6 billion.

Write to Dave Sebastian at [e-mail]

(END) Dow Jones Newswires

October 08, 2020 07:06 ET (11:06 GMT)

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