RESEARCH TRIANGLE PARK – IBM isn’t disclosing a great deal yet about the “NewCo” spinoff it announced Thursday, but some points have been made quite clear:

  • Costs will be cut
  • Some people will lose their jobs

“NewCo” will be broken out of IBM’s Global Technology Services, which has a pretty big presence at its RTP campus. Remnants will be crucial to IBM’s renewed emphasis on cloud computing in which Raleigh-based Red Hat will be a crucial player. After all, cloud capabilities were the key driver of IBM’s $32 billion buyout of the Hatters, a deal that closed last July.

[We’ve included two charts from IBM spelling out details about “NewCo.”]

Rick Smith is editor and cofounder of WRAL TechWire

A spokesperson for IBM confirmed to WRAL TechWire via email after the announcement some details about “NewCo.”

“We expect that the vast majority of employees will fit for roles in NewCo or in IBM, but we’ll complete our planning over the next few months and will advise accordingly,” the spokesperson said when asked about job assurances.

IBM graphic

In a webcast, Arvind Krishna, Chief Executive Officer, and Jim Kavanaugh, Chief Financial Officer, sand the pinoff of “NewCo” would include:

  • A cash charge of $1.5 billion
  • That amount includes “tax changes, separation items and customary items”
  • Non-cash charges of $1 billion

It’s also not clear about compensation levels.

“Any decisions about compensation will be made by IBM prior to the transaction closing,” the spokesperson said.

The deal is expected to close in 2021.

As for leadership, the spokesperson said: “Additional information about upcoming changes, including NewCo leadership, will be shared as it becomes available.”

IBM graphic

Right now “NewCo” covers 90,000 employees spread across 115 countries. [Check this link for more details.]

The Red Hat links

Red Hat will be crucial to IBM’s cloud efforts, which Big Blue declared is a “$1 trillion opportunity.”

“Red Hat is already well integrated into IBM’s open hybrid cloud platform,” the spokesperson noted.

As for former Red Hat CEO Jim Whitehurst?

“Jim is centrally involved in all aspects of this plan, in his role as President of IBM,” the spokesperson said.

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