While the Greyhound Research team is working on a more in-depth commentary about the IBM Split, broadly, we believe this move mirrors the tough call that IBM took ages ago when it let go of its PC business and sold to Lenovo. There’s power in focus, and growth is much more likely when an entire company is aligned to select areas of core strength and importance. We have seen this play out well for Microsoft when Satya set the trajectory back to the enterprise, a place the company knows the best.
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In the case of IBM and similar IT Services companies, it’s no closed-door secret that the Managed Services deals are the more margin-thin areas and the one that hogs a lot of attention, effort, and cash flow from the broader business. Essentially, it slows down the other more forward-looking parts of the company that has significant potential to add to the growth story and offer returns for the shareholders. And most of all, be relevant to the evolving client asks. In IBM’s case, their bet is on Hybrid Cloud and AI, two areas which will attract most, if not all, attention and resources from end-user clients globally.
It is important to note that while any separation of this nature is bound to raise many unknowns, given the evolving nature of client asks, specialist companies are more likely to do better than those with generalist skill sets. Companies must cooperate and work together in today’s day and age, even if they compete in select areas or deals. A case in point is IBM’s deep relationship with VMWare (owned by Dell) and its ownership of Red Hat.
We at Greyhound Research believe, while this separation of IBM will, without a doubt, cause much confusion and heartburn, it’s a small cost to pay in the near-term, for long-term benefits.
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Expect a more detailed piece soon. We appreciate your patience. Thank you!
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