Kyndryl revenue slides, company lays out growth plans

Kyndryl, the infrastructure services company created by IBM last November, released its first financial results as an independent company and outlined plans to focus on high-demand services including security and transformation digital.

The company reported fourth-quarter revenue of $4.6 billion, down 8% year-over-year. Its pretax loss of $732 million in the fourth quarter includes a goodwill impairment charge of $469 million and transaction costs of $129 million associated with the spin-off.

For the full year ending Dec. 31, 2021, the company reported revenue of $18.7 billion, a 4% year-over-year decline and a pretax loss of $1.9 billion. dollars, including the goodwill impairment charge of $469 million and transaction-related costs of $627 million that year.

Speaking to financial analysts on Tuesday, Martin Schroeter, chairman and chief executive of Kyndryl, sounded optimistic about the company’s competitive chances. Freed from IBM, Kyndryl’s addressable market grows from $240 billion to $510 billion by 2024. What will help the company take advantage of new market opportunities are the three cloud-based alliances he has made over the past two months with Microsoft, Google, and AWS.

“Now that we’re independent, today’s most important market trends have gone from headwinds to tailwinds for us,” Schroeter said. “We are moving beyond the constraints of being a captive unit within IBM with its traditional and free offerings to expand the range of services we offer and the breadth of technologies we use.”

Despite its newfound independence, the startup faces a formidable set of challenges, according to a consultant.

“[IBM Global Technology Services] had been problematic for IBM,” said Judith Hurwitz, an independent analyst based in Newton, Mass. “If this fallout had happened years ago, they would be in a better position today. They are not the only company providing technical support. They have to ask themselves, ‘Why do we want to be known?'”

Another challenge Kyndryl faces is IBM, Hurwitz added. While Kyndryl executives have said they don’t expect a significant overlap with IBM, Big Blue’s remaining services group also has strategic alliances with Microsoft, Google and AWS.

“Offering services on multiple platforms is a good thing [for Kyndryl]but IBM has relationships with Amazon, Google, and Microsoft through Red Hat,” Hurwitz said. “It’s not a cut and dry competitive situation for Kyndryl.

Kyndryl puts sites on security and cloud services

Four of the market trends Kyndryl will be focusing on are cybersecurity, resilience, digital transformation and cloud migration. These are areas that Schroeter believes his company can offer more unified sets of products and services across a patchwork of cloud environments.

“Every CEO and CIO I speak with is extremely focused on cybersecurity, especially given the current mix of highly fragmented solutions available,” Schroeter said. “Security threats pose an existential risk to businesses and make it difficult for them to understand what they need, what’s available, and how best to implement it.”

Schroeter outlined three company-wide initiatives that could propel future growth. The first is to increase signatures and certification with its three new cloud partners. This could open the door for Kyndryl to capture up to $1 billion in additional signings by the end of fiscal 2023, which is March 31, 2023.

Second, Kyndryl will dramatically improve service delivery to increase quality and allow the company to move to new revenue streams more quickly, saving up to $200 million in annualized costs.

Third, the company will work to improve the parts of its operations that have substandard margins, which will allow it to better deliver more value for critical services. Schroeter estimates that this initiative can generate $75 million in profits over the next year.

In addition to alliances with the big three cloud providers, Kyndryl has also recently signed contracts with several organizations, including BMW Group to provide integration of various technologies with its data storage infrastructure, and with Raytheon to integrate its digital technology environment through a hybrid cloud.

As Editor-in-Chief of TechTarget’s News Group, Ed Scannell is responsible for writing and editing breaking news, news analysis, and articles focused on technology issues and trends affecting IT professionals. business computing.

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