IBM’s Spinoff and Restructuring Plans Look Like Steps in the Right Direction

As a long-time critic of the company, I’ll be the first to say that IBM (IBM) still faces its share of competitive and secular pressures. But the planned spinoff of Big Blue’s managed IT infrastructure services business is encouraging news.

First, the managed infrastructure business — though said by IBM to have a $60 billion-plus backlog and more than twice the scale of its nearest rival — is clearly struggling. IBM’s “infrastructure & cloud services” revenue, which is reported within its Global Technology Services (GTS) segment, was down 7% annually in Q2, 6% in Q1 and 5% in Q4. And this is in spite of the fact that this revenue also covers the IBM Cloud public cloud services unit, which appears to be growing.

Secular headwinds — specifically, the adoption of cloud infrastructure platforms much larger than IBM’s, such as AWS and Microsoft Azure — are clearly a factor here. But growth comparisons suggest GTS has also been losing share to rivals such as Accenture (ACN) and Wipro (WIT) . A spinoff that leaves IBM’s managed infrastructure business in the hands of a management team that’s focused solely on running that business just might help turn things around.

Meanwhile, shedding the managed infrastructure business allows new CEO Arvind Krishna and other IBM execs to direct more of their attention towards value-added software, hardware and services offerings. And from the looks of things, that’s what they generally want to do.


Quite a few IBM businesses are seeing revenue declines right now. Source: IBM.

To be sure, the IBM press release announcing the spinoff still contains a lot of the usual Big Blue marketing-speak. Though IBM might now claim to be focused on “its open hybrid cloud platform and AI capabilities,” many of the businesses that aren’t being spun off have nothing

No current plans for central bank to adopt digital currencies

Kansas City Fed President Esther George said Monday that the Federal Reserve is continuing its research on central bank-issued digital currencies, but that there are no plans at the moment to actually launch one in the U.S.

“I think it’s prudent that we do our homework and think about what that entails,” George told Yahoo Finance at the Sibos conference organized by the Society for Worldwide Interbank Financial Intermediation (SWIFT).

For the last few years, the Fed has been conducting “in-house experiments” on the use cases for distributed ledger platforms. But the central bank is now extending its research by looping in the Massachusetts Institute of Technology to actually build and test a hypothetical digital currency.

Fed Governor Lael Brainard, who has headed efforts on central bank digital currencies alongside George, said in August that their interest is focused on the “opportunities and limitations of possible technologies.”

Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver, Colorado, U.S. October 6, 2019. REUTERS/Ann Saphir
Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver, Colorado, U.S. October 6, 2019. REUTERS/Ann Saphir

Although the Fed is not committing to launching its own digital currency, the central bank is charging ahead with its efforts to bring real-time payments to the United States. While services like PayPal-owned (PYPL) Venmo and Cash App are designed to offer quick peer-to-peer payments, check clearing still takes days for funds to arrive at one’s checking account in the U.S..

“Building the highways on which those payments can run and actually settle in real time became an increasingly obvious need for the country and that’s the one that we’re focused on right now,” George said.

The Fed hopes to stand up its FedNow system to allow 24/7 real-time payments by 2023 or 2024. George said the project is “on track” with that timeline, but said the Fed hopes

Big Tech Was Their Enemy, Until Partisanship Fractured the Battle Plans

WASHINGTON — For all the divisions in Washington, one issue that had united Republicans and Democrats in recent years was their animus toward the power of the biggest tech companies.

That bipartisanship was supposed to come together this week in a landmark House report that caps a 15-month investigation into the practices of Amazon, Apple, Facebook and Google. The report was set to feature recommendations from lawmakers to rein in the companies, including the most sweeping changes to U.S. antitrust laws in half a century.

But over the past few days, support for the recommendations has split largely along party lines, said five people familiar with the talks, who were not authorized to speak publicly because the discussions are private.

On Monday, the Democratic staff on the House Judiciary Committee delayed the report’s release because they were unable to gain Republican support. Representative Jim Jordan of Ohio, the top Republican on the committee, has asked his colleagues not to endorse the Democratic-led report, said two people with knowledge of the discussions. And Representative Ken Buck, a Republican of Colorado, has circulated a separate report — titled “The Third Way” — that pushes back against some of the Democrats’ legislative recommendations, according to a copy obtained by The New York Times.

The Republicans’ chief objections to the report are that some of the legislative proposals against the tech giants could hamper other businesses and impede economic growth, said four people with knowledge of the situation. Several Republicans were also frustrated that the report didn’t address claims of anti-conservative bias from the tech platforms. Mr. Buck said in “The Third Way” that some of the recommendations were “a nonstarter for conservatives.”

The partisan bickering has cast a cloud over what would be Congress’s most aggressive act to curtail the power of technology

Safety panel has “great concern” about NASA plans to test Moon mission software

Teams at NASA's Michoud Assembly Facility move the Core Stage toward a barge in January that will carry it to a test stand in Mississippi.
Enlarge / Teams at NASA’s Michoud Assembly Facility move the Core Stage toward a barge in January that will carry it to a test stand in Mississippi.

NASA

An independent panel that assesses the safety of NASA activities has raised serious questions about the space agency’s plan to test flight software for its Moon missions.

During a Thursday meeting of the Aerospace Safety Advisory Panel, one of its members, former NASA Flight Director Paul Hill, outlined the panel’s concerns after speaking with managers for NASA’s first three Artemis missions. This includes a test flight of the Space Launch System rocket and Orion spacecraft for Artemis I, and then human flights on the Artemis II and III missions.

Hill said the safety panel was apprehensive about the lack of “end-to-end” testing of the software and hardware used during these missions, from launch through landing. Such comprehensive testing ensures that the flight software is compatible across different vehicles and in a number of different environments, including the turbulence of launch and maneuvers in space.

“The panel has great concern about the end-to-end integrated test capability plans, especially for flight software,” Hill said. “There is no end-to-end integrated avionics and software test capability. Instead, multiple and separate labs, emulators, and simulations are being used to test subsets of the software.”

The safety panel also was struggling to understand why, apparently, NASA had not learned its lessons from the recent failed test flight of Boeing’s Starliner spacecraft, Hill said. (Boeing is also the primary contractor for the Space Launch System rocket’s core stage).

Prior to a test flight of the Starliner crew capsule in December 2019, Boeing did not run integrated, end-to-end tests for the mission that was supposed to dock with the International Space Station. Instead of running a software test that encompassed

Germany’s stock exchange plans tougher rules after Wirecard scandal

Bull and bear statues outside Frankfurt's stock exchange. Photo: Alex Domanski/Reuters
Bull and bear statues outside Frankfurt’s stock exchange. Photo: Alex Domanski/Reuters

Deutsche Börse, Germany’s stock exchange operator, is considering stringent new admission rules as part of reforms in the wake of the Wirecard accounting-fraud scandal.

It is also proposing increasing the size of the blue-chip DAX index (^GDAXI) from 30 to 40 companies.

“It’s no secret that I personally would welcome the expansion of the Dax 30 to a Dax 40,” said Deutsche Börse chief executive Theodor Weimer on Monday. “I am looking forward to the result and am sure that the further development of the criteria will help the German capital market to achieve further quality.”

READ MORE: German lawmakers to launch parliamentary probe into Wirecard scandal

Investors have until 4 November to submit their comments on the stricter new admission criteria, which include banning companies from the DAX if they don’t submit their accounts on time.

Members of all the German indices, which include the DAX, MDAX, TecDAX and SDAX, would also need to show proof of an audit committee on their supervisory board in future.

The new proposals say that companies should be demonstrably profitable before they can move up into the leading DAX index.

In addition, firms making more than 10% of their revenue from controversial weapons sales would be excluded from the indices, which include the DAX, MDAX, TecDAX and SDAX.

As part of the proposals, the small-cap MDax would shrink by 10, to a total of 60 companies.

The German financial world and the political establishment has been rocked by the enormous scandal at payments company Wirecard, after it emerged in June this year that billions were missing from its balancesheet.

READ MORE: Germany’s financial regulator chief rules out resigning over Wirecard scandal

Wirecard declared bankruptcy in June, and was ejected from the DAX