Old hand at NewCo: IBM re-hires former CFO to run soon-to-be-spun-out Global Tech Services division

IBM has tapped up its former chief beancounter Martin Schroeter to run the breakaway IT infrastructure services division scheduled to launch at the end of next year.

Global Technology Services, minus a few elements, will be spun out to form a separate but as yet unnamed entity – a strategy hatched by CEO Arvind Krishna and made public in October. This followed years of declining revenue at both GTS and the wider IBM.

The decision means IBM can concentrate on its existing business of hybrid cloud, professional services, software and hardware, including servers and storage.

Schroeter, who exited IBM in June last year, was most recently senior veep for global markets (2017-2020), prior to that he was CFO from 2014 and even further back in time he was general manager at Big Blue’s leasing arm Global Financing.

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At the NewCo, he will take responsibility from day one for 4,600 existing clients in 115 countries, $60bn in service backlog and, according to IBM, some 90,000 staff. Although one respected Wall Street analyst said he anticipates a bloodbath in terms of job losses based on the $2.3bn charge IBM had accounted for.

Cue the gushing canned remarks from Krishna, referring to the re-hired exec as being “uniquely qualified to drive the long-term success of the new, independent company”.

He added: “[Schroeter] has a deep understanding of the industry and has earned the trust of our clients.”

Given that outsourced infrastructure services is a lower margin game and more customers are instead choosing to go to the cloud, Schroeter’s skills with a calculator will also come in handy for decision-making.

GTS generated $26.4bn in revenue during the previous reported four quarters with an operating margin of 6.4 per cent. However, this includes the Technical Support Business (TSB) which itself had $6.4bn in sales and 30 per cent pre-tax income margin. TSB is not being included in the operations moving to the NewCo.

That aforementioned respected Wall Street analyst, Bernstein’s Toni Sacconaghi, said of the spin-off that IBM was removing a “no-growth, break even business.” The analyst also questioned if this was “value creation or financial engineering” by IBM for its stockholders.

“The alternative, more positive perspective is that such divestitures happen all the time in tech – HP, as was, saw a fair share of [comings] and goings under former CEO Meg Whitman – and IBM may be able to grow when unshackled from a unit that has been an anchor,” said Sacconaghi.

Schroeter is due to start on 15 January. ®

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