The globe was in the early stages of the COVID epidemic when Arvind Krishna became CEO of IBM in April 2020, and his business was having trouble. It was in serious need of a change of course after reporting dwindling income for the greater part of a decade. Whatever IBM was doing, it wasn’t very effective. He had his work cut out for him, no doubt. But his predecessor Ginni Rometty gave him something to work with by approving the $34 billion acquisition of Red Hat in one of her final acts as CEO. Red Hat had to be the focal point of any reform attempt, Krishna probably understood as he assessed the existing situation of his venerable enterprise.
He also understood that he needed to start eliminating the dead weight that was hurting his business. He declared in October 2020 that he wanted to spin out IBM’s $19 billion infrastructure services division, which represents his biggest step to date. When the spinout was ultimately completed in November of last year, that deal gave rise to Kyndryl. This was about saying goodbye to old enterprises and putting all of your energy on modernization, which was symbolized by Red Hat, as I noted when the news was first made.
But he didn’t simply toss the outdated. He also abandoned several of the more recent AI initiatives. He specifically cut down Watson Health, the group of businesses that Rometty had acquired in the years 2014 and 2015 with the belief that she was gaining an advantage by focusing on healthcare data. It was more difficult than she had anticipated to pull off that market. Krishna subsequently dropped the division in a transaction with Francisco Partners that was reportedly valued at roughly $1 billion, far less than the total cost of the parts the business had acquired to build out the division.
Big Blue reported growth of 6.5 percent and 8 percent during the two most recent quarters, suggesting that these actions and others are, at least initially, moving the firm in the right direction. It’s a start, and Krishna would probably be content to continue the gradual but steady progress in the future. Before the IBM Think Conference, which begins today in Boston, Krishna sat down for a virtual round table conversation with a number of reporters yesterday. He discussed a variety of topics, including the future role AI wants to play for his firm, the organization’s work in quantum computing, and the expanding ESG and sustainability sector.