Kyndryl starts trading on NYSE after spin-off from IBM

The managed infrastructure services division of IBM’s global technology services unit has 90,000 employees

Martin Schroeter, Kyndryl's chief executive, said there was 'a large and growing need for digital transformation services'. Photo: Kyndryl

Kyndryl completed its spin-off from International Business Machines and has started trading as an independent company on the New York Stock Exchange under the ticker symbol KD.

The New York-based company – the managed infrastructure services division of IBM’s global technology services unit – became an independent, publicly traded company by ringing the opening bell at the US exchange on Thursday.

Last year, IBM said it would spin off Kyndryl, and its board of directors approved the deal last month. The new company has about 90,000 employees.

We look forward to the path ahead, with a flatter and faster company that is at the heart of progress for our customers and for the world

Martin Schroeter,
Kyndryl's chairman and chief executive

“We are thrilled that Kyndryl is today an independent company … with 90,000 of the best and brightest professionals, a strong balance sheet and a path to growth”, said Martin Schroeter, Kyndryl's chairman and chief executive.

Shareholders do not need to take any action to receive shares of Kyndryl common stock, which they are entitled to as IBM stockholders, the company said.

Nearly 80.1 per cent of Kyndryl shares were distributed to the shareholders of IBM, who received one Kyndryl share for every five IBM shares owned.

IBM has temporarily retained a 19.9 per cent equity stake in Kyndryl following this distribution. It aims to exchange those shares for IBM debt during the 12-month period following the distribution, subject to market considerations, the company said.

“There is a large and growing need for digital transformation services … our expertise in creating, managing and modernising mission-critical information systems positions us well in a market that will expand to more than $500 billion by 2024,” Mr Schroeter said.

“We look forward to the path ahead, with a flatter and faster company that is at the heart of progress for our customers and for the world.”

IBM reported a 33.5 per cent dip in third-quarter net profit to $1.1bn on October 21, as the company posted flat sales growth in the three months to September 30.

Sales at the global technology services unit, which included Kyndryl before the spin-off, dropped about 5 per cent to $6.2bn in the July-September period.

IBM earned revenue of $17.6 billion in the third quarter. Bloomberg

Industry analysts said that IBM separated its slower-growth business so it could focus on the boom in demand for cloud services and compete better with Amazon and Microsoft.

This spin-off is a “milestone for IBM, its employees and its shareholders as we enter a new era of growth”, IBM’s chairman and chief executive Arvind Krishna said last month.

“The separation of Kyndryl is a significant step in the continued evolution of IBM, a company now squarely focused on delivering powerful hybrid cloud and AI [artificial intelligence] solutions and capabilities to enterprises around the world,” he said.

Kyndryl has more than 4,600 global customers in 115 countries in the financial services, telecoms, retail, aviation and automotive sectors. Its clients include 75 of the US Fortune 100 companies, the largest public and private companies in the US based on revenue.

Revenue at Kyndryl dropped last year by more than 4 per cent annually to $19.4bn, after falling nearly 6.8 per cent in 2019, according to a Securities and Exchange Commission filing.

It generated $4.75bn in sales in the three months ended June 30, compared with $4.73bn for the corresponding quarter last year.

Kyndryl did not disclose the names of its clients in the Middle East.