Venerable computing giant IBM announced it will split itself into two publicly traded companies, a move to more effectively focus on key profitable sectors such as cloud computing and artificial intelligence.

One of the two resulting companies, currently temporarily named NewCo, will focus on what IBM has done for decades in infrastructure and servers. The split will take effect next year, and the final name of the new company will be announced then, while the name IBM will remain with the core company.

CEO Arvind Krishna indicated that this step was expected, as IBM previously spun off its networking business in the 1990s, followed by its PC business in the 2000s, and five years ago its semiconductor business.

IBM, which is over a century old, believes that these sectors do not necessarily work together within the same entity to deliver value to customers, hence the separation to better focus on their activities.

IBM completed its acquisition of cloud computing and systems giant Red Hat last year for $34 billion. With this split, the company positions itself as a major player poised to gain more market share in a sector dominated by Amazon and Microsoft.

The split will cost about $5 billion to break up the company, which employs 352,000 people and has a market value of $115 billion.

NewCo will have annual revenues of about $19 billion, serve 75% of the top 100 U.S. companies, and employ 90,000 people.

Source:

IBM.com

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