Can chameleon Big Blue change its colours?
Summary
Palmisano wrote: “This is a fundamentally different IBM than existed a decade ago – one that is delivering historic results despite a global economic downturn, even as it more fully exemplifies the company’s century-old character.” Less than a decade later, while Rometty remains chairman, Arvind Krishna is now CEO, the company has spent $34bn acquiring Red Hat to bolster its cloud offerings, and is now spinning off its IT services arm. IBM will accelerate clients’ digital transformation journeys, and NewCo will accelerate clients’ infrastructure modernisation efforts.” Through the split, said IBM, NewCo will increase investment in the next generation of transformational managed infrastructure services, with more opportunity for margin expansion, profit growth and cash generation. In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, he discussed how the coronavirus pandemic had impacted the business. So NewCo can also pursue an interesting growth path.” According to Forrester principal analysts Bill Martorelli and Brian Hopkins, the GTS business has been underfunded for a long time. In a note responding to the IBM news, they wrote: “The hope is that GTS in its new life will see greater investment, and that as a pure-play infrastructure management service, it can be operated for growth (in the account) and profit (through automation) at a much lower cost of capital, using debt instead of equity to fund growth and acquisitions.” In the presentation that accompanied its first-quarter 2020 earnings, posted on Seeking Alpha, the company highlighted the tight integration between the Global Business Systems (GBS) division, which is being retained by IBM, and GTS “to address the cloud opportunity”.