IBM(IBM)($127.79USD/Share) this week announced that they will be splitting into 2 separate public companies. This is amazing news for investors because it means that they are going to be focusing on cloud computing and artificial intelligence. This is being made possible through their purchase of the company Red Hat in July of 2019 for $34 Billion. Why is this good for investors you say? Because a MASSIVE company like IBM that has been around since 1911 is still able to pivot and adapt to what the business needs to keep being successful.
I had a conversation with a friend yesterday about how it is always smart to invest in big companies spin-offs. Look at how eBay(EBAY)($55.45USD/Share) is doing compared to its spinoff PayPal(PYPL)($197.27USD/Share). You could also look into how many times HP inc(HPQ), Brookfield Asset Management(BAM) and General Electric(GE) have spun off and find yourself with plenty of options for a good investment. Now, i’m not saying that every spin off is a safe investment but in the case of IBM its hard not to want to get in on it. Especially since they are trying to compete with other tech giants like Amazon(AMZN), Google(GOOGL) and Microsoft(MSFT) for their share of the pie.
This is still some fairly new news though, new enough that IBM hasn’t even released many details of this new company. They don’t even really have a name for it yet, they are just referring to it as “NewCo”(very original IBM). What we do know is that the spin-off will be handling their legacy IT infrastructure work. We also currently know that the spin-off will happen before the 4th quarter in 2021. I feel that this is all positive news for IBM and a very smart move that will put direct focus on those 2 very important sectors. All this good news is why I will continue to hold my position in IBM for the long term.
That is all for today and remember everyone, invest in yourself first.
*Disclaimer, all share prices are after market close as of trading day October 9, 2020. I currently hold a position in IBM.