IBM (IBM.N) missed quarterly revenue projections on Wednesday due to a drop in orders in its managed infrastructure business ahead of a spinoff next month, sending its shares down 4% in extended trade.
The legacy unit, which provides lower-margin technical assistance to IBM’s clients, has decreased in recent years as corporations have moved to the cloud, putting a damper on Big Blue’s revenues.
“As we issued the effective date for the spin-off of our managed infrastructure business, our clients paused all-new project activities at the end of September and that impacted us here,” Chief Financial Officer James Kavanaugh said in an interview.
In the third quarter ended Sept. 30, revenue in the global technology services unit, which houses the division that will be called Kyndryl after the spinoff, fell 4.8 percent to $6.15 billion.
Demand for IBM’s mainframe computers fell as the end of the product cycle approached, according to Kavanaugh, resulting in a 12 percent decline in revenue for the systems division.
To accelerate growth and better compete with Amazon.com Inc (AMZN.O) and Microsoft Corp, IBM, which is 110 years old, has shifted its attention to hybrid-cloud, an area where it sees a $1 trillion market opportunity (MSFT.O).