Summary
- How have other tech spin-offs performed?
- How might the spin-off benefit IBM itself?
- What's left after the spin-off is the sexy stuff, cloud, AI, and Redhat.
- This deal should ensure the dividend increases going forward.
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IBM (IBM) is one of the most written about stocks on Seeking Alpha. There are at least as many detractors as there are supporters.
I have been a supporter for longer than I care to admit, but I'm convinced that under new leadership, they are finally going in the right direction - up.
I recently have written articles on IBM explaining my position "IBM: There's A New Sheriff In Town" and "IBM: Even Veteran Players Turn Around Eventually".
Recent news at IBM includes the spin-off of the Managed Infrastructure Services unit of its Global Technology Services operation into a new public company (closing late 2021) and the most recent earnings report for the third quarter 2020.
Here are four items to consider when looking at IBM's spin-off.
1. How have other tech spin-offs performed?
This is not the first spin off from what I call an old-tech company. There have been many others before. Here are three that may be indicative of what IBM shareholders can expect.
In 2015, HP Inc. (HPQ) spun-off of HP Enterprises (HPE) in this case separating the hardware business from the service business not unlike what IBM is attempting. In this case, the spin-off did a little better at the one-year mark but not a whole lot of difference. In fact, you would have to get to the pandemic to see any meaningful difference.
Then interestingly enough, HPE spun-off DXC Technology (DXC) in 2017. After about one year they were neck and neck but after that began to separate with DXC dropping more than HPE.
