Kyndryl Announces Portfolio Optimization Actions

Rhea-AI Summary

Kyndryl, the world's largest IT infrastructure services provider, announced the acquisition of Skytap to enhance hybrid cloud adoption and the sale of its Securities Industry Services business in Canada to Broadridge to focus on core growth areas. The acquisitions aim to modernize mission-critical infrastructure platforms and accelerate advanced analytics, artificial intelligence, and cloud services adoption. Both acquisitions accounted for less than 1% of Kyndryl's annual revenue, with no impact on the fiscal year 2025 outlook.

Positive

• Acquisition of Skytap to expand hybrid cloud services portfolio and accelerate cloud adoption

• Acquisition of Skytap to enhance advanced analytics, artificial intelligence, and development capabilities

• Divestiture of Securities Industry Services business in Canada to focus on core growth areas

• Expected transaction-related gain from the divestiture of SIS business

• Proceeds from transactions to be used for general corporate purposes

Negative

• Revenues generated by Skytap and SIS accounted for less than 1% of Kyndryl's annual revenue

• No impact on Kyndryl's fiscal year 2025 outlook from the transactions

Insights

Tech Industry Analyst

Kyndryl's recent acquisition of Skytap can be seen as a strategic move to enhance its offerings in the hybrid cloud space. The integration of Skytap's specialized workload services will augment Kyndryl's existing capabilities, potentially leading to synergies that could provide a competitive edge in the market. From a technological standpoint, the emphasis on transitioning complex workloads and the focus on DevSecOps could address a growing demand for scalable and secure cloud solutions. Given the size of Skytap's revenue in comparison to Kyndryl's total earnings, the immediate financial impact appears minimal. However, this could lay the groundwork for future growth, especially if Kyndryl successfully leverages Skytap's technologies to capitalize on the shift towards cloud infrastructure.

Financial Analyst

The divestiture of Kyndryl's Securities Industry Services business to Broadridge looks to be a calculated decision to streamline operations and concentrate on core competencies. Despite the transaction-related gain, which Kyndryl will exclude from its adjusted results, there's no significant change anticipated in the fiscal 2025 outlook. This suggests a neutral financial impact in the short term. Investors may view the use of proceeds for general corporate purposes as a standard practice, lacking a direct growth catalyst. While the strategic refocusing could be beneficial in the long term, immediate stock movement may not reflect these changes, as the market typically seeks clearer indicators of revenue growth or cost savings.

Acquires privately held Skytap to accelerate hybrid cloud adoption and help customers modernize mission-critical infrastructure platforms 

Announces definitive agreement to sell its Securities Industry Services business in Canada to Broadridge to enhance Kyndryl's focus on core growth areas

NEW YORK, May 13, 2024 /PRNewswire/ -- Kyndryl (NYSE: KD), the world's largest IT infrastructure services provider, today announced that it has acquired privately held Skytap, a leading specialized workload services provider.

"The acquisition of Skytap reflects the proactive steps we're taking to invest in our mission-critical capabilities where our global alliance partnerships and innovation enable us to help our customers transform and grow," said Dave Simpson, Global Practice Leader for Cloud at Kyndryl.

Kyndryl's acquisition of privately held Skytap will expand the Company's hybrid cloud services portfolio. Skytap's innovative technologies will be combined with Kyndryl's expertise in helping customers utilize cloud native services to accelerate the adoption of advanced analytics, artificial intelligence and development, security and operations (DevSecOps). Skytap is recognized as having particularly strong capabilities for transitioning complex workloads to support hyperscaler environments. Skytap's technologies enable customers to move and run their mission-critical systems in the public cloud with minimum change.

Additional Portfolio Optimization

Kyndryl also announced that it has entered into a definitive agreement to divest its transaction processing platform for the securities brokerage industry in Canada, known as Securities Industry Services (SIS), to Broadridge Financial Solutions, Inc. Kyndryl intends to provide managed services and capabilities to Broadridge related to SIS following the divestiture.

Revenues generated by both Skytap and SIS over the last twelve months were less than 1% of Kyndryl's annual revenue. While Kyndryl expects to record a transaction-related gain (excluded from its adjusted results) in conjunction with the SIS divestiture, the transactions have no impact on Kyndryl's fiscal year 2025 outlook, which was provided on May 7, 2024. The Company intends to use the net proceeds from the two transactions for general corporate purposes.

Terms of the transactions were not disclosed. Closing of the SIS transaction is subject to customary closing conditions, including required regulatory approvals.

About Kyndryl
Kyndryl (NYSE: KD) is the world's largest IT infrastructure services provider, serving thousands of enterprise customers in more than 60 countries. The Company designs, builds, manages and modernizes the complex, mission-critical information systems that the world depends on every day. For more information, visit www.kyndryl.com.

Media Contact
press@kyndryl.com 

Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements often contain words such as "will," "anticipate," "predict," "project," "plan," "forecast," "estimate," "expect," "intend," "target," "may," "should," "would," "could," "outlook," "goal" and other similar words or expressions or the negative thereof or other variations thereon. All statements, other than statements of historical fact, including without limitation statements representing the Company's plans and beliefs about future events, transactions, strategies, operations and financial results, may be forward-looking statements. These statements do not guarantee future performance and speak only as of the date of this press release. Except as required by law, the Company assumes no obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual outcomes or results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties including those described in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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SOURCE Kyndryl

FAQ

What did Kyndryl announce?

Kyndryl announced the acquisition of Skytap and the sale of its Securities Industry Services business in Canada.

What is the impact of the acquisitions on Kyndryl's revenue?

The revenues generated by Skytap and SIS accounted for less than 1% of Kyndryl's annual revenue.

What will Kyndryl do with the proceeds from the transactions?

Kyndryl intends to use the net proceeds for general corporate purposes.

Who is Kyndryl?

Kyndryl is the world's largest IT infrastructure services provider.

What sectors will Kyndryl focus on after the sale of SIS business?

Kyndryl will focus on core growth areas following the sale of its Securities Industry Services business in Canada.