Bloomberg News

IBM to Sell Customer-Service Unit to Synnex for $505 Million (1)

September 11, 2013

International Business Machines Corp. (IBM:US), the world’s largest computer-services provider, agreed to sell its customer-care outsourcing business to Synnex Corp. (SNX:US) for $505 million to focus on more profitable investments.

Synnex will pay $430 million in cash and $75 million in stock, giving IBM a stake in Synnex, the companies said in statements yesterday. The unit had $1.3 billion in 2012 sales, accounting for more than 1 percent of IBM’s revenue. Synnex shares jumped to a record intraday price.

IBM is getting rid of businesses with lower profit margins to reach a goal of $20 a share in earnings by 2015, up from $15.25 last year. The company last year sold its retail-store systems unit to Toshiba Tec Corp. (6588) for $850 million. IBM has had talks with Lenovo Group Ltd. (992) about selling its division that makes standard X86 servers, which have become a commodity item amid increasing competition, people familiar with the matter said earlier this year.

“As you look at our strategy, we continue to move our business and transform our business to the higher-value spaces,” said Lori Steele, general manager of IBM Global Process Services, in an interview. “We’re trying to focus on software and analytics.”

The company, based in Armonk, New York, said earlier this year that it would sell assets to make up for a $1 billion charge to cut jobs. IBM excluded the charge from its 2013 earnings forecast, saying future divestitures would make up for the expense.

Lower Margins

The customer service unit had a gross profit margin of about 20 percent, IBM Chief Financial Officer Mark Loughridge said in a presentation to investors earlier this year. That compares with margins of about 60 percent for newer businesses like analytics and cloud computing.

Synnex, based in Fremont, California, said the transaction will add 55 cents in earnings per share in the first 12 months after it closes the deal. Its shares jumped as much as 21 percent to an all-time high of $57.82. They were up 19 percent to $57.06 at 9:48 a.m. in New York. IBM rose less than 1 percent to $188.16.

To contact the reporters on this story: Crayton Harrison in New York at tharrison5@bloomberg.net; Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • IBM
    (International Business Machines Corp)
    • $192.99 USD
    • 1.83
    • 0.95%
  • SNX
    (SYNNEX Corp)
    • $69.87 USD
    • 1.42
    • 2.03%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus