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Red Hat rescues IBM from otherwise grim Q3 ahead of “Kyndryl” spinoff.

Published by The Stack
October 22, 2021 @ 11:48 AM

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Red Hat rescues IBM from otherwise grim Q3 ahead of “Kyndryl” spinoff.

IBM q3

IBM revenue climbed just 0.3% in Q3, sending shares tumbling after hours as the company gears up to divest its $19 billion managed infrastructure services business, which will be branded Kyndryl — a move was announced on October 8, 2020 but only approved by its board of directors on October 12, 2021.

(The idea is to shift IBM out of the low-margin managed infrastructure realm and more into higher-margin software. Per its initial forecasts, IBM will bring in less revenue post-spinoff but almost the same free cash flow as it did before. With the unit a key source of the disappointing results, the move makes sense.)

A sharp slump in mainframe sales (IBM Z sales crashed 33% on a largely cyclical basis; a decline that was somewhat offset by storage growth of 11%) also particularly hurt the bottom line. CFO Jim Kavanaugh noted: “The infrastructure segment, which is high-value, mission-critical covering our mainframe business and infrastructure support business, was projected to be flat over time as it follows innovation cycle. As we bring out innovation next year, we firmly believe and [are] confident that we’re going to grow there.”

Posted in:CIONET UK

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