January 22, 2022

IBM Spinoff Kyndryl Starts Quest for Growth

International Business Machines Corp.

completed the spinoff of its $19 billion information technology services business on Wednesday, betting that independence will make it easier to reverse a decline in revenue.

The new company,

Kyndryl Holdings Inc.,

began trading Thursday on the New York Stock Exchange under the symbol KD. Shares closed at $26.38, down 7.4%, according to FactSet data.

Kyndryl will help companies modernize and manage their IT infrastructure, taking its place as one of the largest players in a competitive market.

Kyndryl CEO Martin Schroeter.



Photo:

Kyndryl Holdings Inc.

Chief Executive

Martin Schroeter

said Kyndryl expects to show revenue growth in 2025, now that customers are less likely to see it as tied to IBM technology.

“The spin now allows a whole new set of customers who felt as though…we were just there to sell the IBM technologies to now open up a new set of discussions,” Mr. Schroeter said.

Kyndryl revenue declined 4.6% to $19.35 billion for the year ended Dec. 31, 2020, from $20.28 billion in the prior year, according to a document included with the company’s Form 10 filing with the Securities and Exchange Commission. Revenue declined 7% in 2019 from $21.796 billion in 2018, according to the document, which has three years of financial data.

For the six months ended June 30, 2021, the company had revenue of $9.5 billion, down 0.5% from the same six-month period the year before.

Kyndryl reported a net loss of $2.01 billion for 2020. Chief Financial Officer

David Wyshner

said that the company had income last year of $67 million on a pretax adjusted basis, accounting for legal, audit, advisory and other internal restructuring charges. The company has about $2 billion in cash with net debt of $1.2 billion, he said.

It ended 2020 with about 4,400 customers, down from about 4,600 customers in the prior year.

There is a lot of opportunity for Kyndryl outside of IBM, according to

Alastair Edwards,

chief analyst at research firm Canalys. The question is how effectively it can go out and capture it, he said.

Some of Kyndryl’s rivals are further ahead in areas such as helping customers manage multiple cloud providers, he said.

Kyndryl remains highly dependent on IBM’s mainframe customer base, according to Mr. Edwards. Its move into higher-value services will require an investment of money and time in training and technical certifications, he said. Kyndryl also needs to establish its own identity in the market, which will take time, according to Mr. Edwards.

Kyndryl is looking to support businesses running operations on cloud platforms such as those from

Amazon.com Inc.,

Microsoft Corp.

and

Alphabet Inc.’s

Google. It faces rivals including

Accenture

PLC,

Atos SE,

Capgemini SE,

HCL Technologies Ltd.

and

Tata Consultancy Services Ltd.

Kyndryl will increase its investment in training its workforce of about 90,000 people to handle different cloud platforms, according to Mr. Schroeter, an IBM veteran who previously served as IBM senior vice president for global markets. He also served as IBM’s chief financial officer.

Mr. Schroeter joined IBM in 1992. He retired in 2020, but returned in January to lead Kyndryl.

Kyndryl has been mainly focused on managing IBM customers’ data center equipment, a business that has been contracting as corporations move to the cloud, according to Mr. Schroeter. “The on-prem world is shrinking dramatically. And that’s where…Kyndryl is overweighted,” Mr. Schroeter said.

Mr. Schroeter said Kyndryl will now focus more attention on the global managed cloud services market, which is growing.

The company also plans to broaden its offering in software-applications management, according to Mr. Schroeter. “We show up now with a different mission,” he said.

“If Martin and Kyndryl create a culture of employees and customers first and don’t fall into the trap of short-term P&L gains, they should be able to grow,” said

Michael Synn,

senior vice president of infrastructure technology at fintech company

Broadridge Financial Solutions,

a customer of Kyndryl’s predecessor organization at IBM for more than 10 years.

Big tech firms are investing in data centers as they compete for the $214 billion cloud computing market. In this video from 2019, WSJ explains what cloud computing is, why big tech is betting big on future contracts.

Write to John McCormick at john.mccormick@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

in Tech
Related Posts

Your NFT Sold for $69 Million—Now What? Beeple Turns to a New Project, and Old Masters.

June 24, 2021

June 24, 2021

Now, Mr. Winkelmann is opening up, revealing that he’s had a rocky entrée into the art establishment even though he...

Indian Police Visit Twitter’s Office After Politician’s Tweet Is Labeled as Misleading

May 25, 2021

May 25, 2021

Indian police visited Twitter Inc.’s office in New Delhi to investigate the company’s labeling of tweets from a ruling party...

SoftBank Latin America Fund Leads $28 Million Atom Finance Funding Round

June 23, 2021

June 23, 2021

SoftBank Group Corp. 9984 -0.18% is investing in startup investing platform Atom Finance, in a bet by the Japanese conglomerate that...

Pinterest Vows to Add More Female Executives, Workers of Color

May 18, 2021

May 18, 2021

Pinterest Inc. PINS 0.77% has set new targets for increasing the number of women in leadership and improving racial and...

Why Crime Could Kill Crypto

June 18, 2021

June 18, 2021

The strongest argument against cryptocurrencies used to be that they had yet to show they were much good for anything....

Ohio Sues Meta Alleging Facebook Parent Misled Public About Its Products’ Effect on Children

November 15, 2021

November 15, 2021

Ohio’s attorney general is suing Meta Platforms Inc., formerly known as Facebook Inc., alleging the company misled the public about...

Jack Ma’s Ant in Talks to Share Data Trove With State Firms

June 23, 2021

June 23, 2021

HONG KONG—Ant Group Co. is in talks with Chinese state-owned enterprises to create a credit-scoring company that will put the...

Former WeWork Chief’s Gargantuan Exit Package Gets New Sweetener

May 27, 2021

May 27, 2021

Nearly two years ago, SoftBank Group Corp. 9984 -2.20% sought to part ways with WeWork co-founder Adam Neumann when it...

Russia Puts the Squeeze on Social Media to Police Its Critics

June 8, 2021

June 8, 2021

MOSCOW—Russia’s government was quick to use social media when it tried to steer the course of U.S. elections, American officials...

Stack Overflow Sold to Tech Giant Prosus for $1.8 Billion

June 2, 2021

June 2, 2021

Prosus PRX 0.54% NV said it struck a $1.8 billion deal to acquire Stack Overflow, an online community for software...

TikTok Owner ByteDance’s Annual Revenue Jumps to $34.3 Billion

June 17, 2021

June 17, 2021

SINGAPORE—ByteDance Ltd., the owner of popular short-video app TikTok, told employees that its revenue last year more than doubled to...

GameStop Remakes C-Suite, Board in Turnaround Push

June 9, 2021

June 9, 2021

The company named two Amazon.com Inc. veterans as its chief executive and chief financial officer, and shareholders voted Ryan Cohen...

WeWork CEO Says Least Engaged Employees Enjoy Working From Home

May 12, 2021

May 12, 2021

The CEO of WeWork thinks there is an easy way for companies to spot their most engaged employees: They’re the...

Want to Invest in Cybersecurity? Here Are Some ETFs to Consider

June 7, 2021

June 7, 2021

As cyberattacks become more frequent, the demand for cybersecurity-related services is naturally booming. And that may be something investors can...

Next-Generation GPS Firm NextNav Nears SPAC Deal to Go Public

June 10, 2021

June 10, 2021

NextNav Holdings LLC is nearing a combination with a special-purpose acquisition company that would take the next-generation GPS firm public...