Kyndryl Acquires Skytap, Divests Securities Industry Services Business

Kyndryl acquires Skytap, a cloud migration company, to enhance its hybrid cloud offerings. The company also divests its Securities Industry Services business in Canada to Broadridge Financial Solutions, Inc.

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Kyndryl Acquires Skytap, Divests Securities Industry Services Business

Kyndryl Acquires Skytap, Divests Securities Industry Services Business

On May 13, 2024, Kyndryl, the world's largest IT infrastructure services provider, announced two significant transactions aimed at enhancing its hybrid cloud offerings and focusing on core growth areas. The New York-based company has acquired privately held Skytap, a leading specialized workload services provider, and divested its Securities Industry Services (SIS) business in Canada to Broadridge Financial Solutions, Inc.

Why this matters: This acquisition and divestiture strategy demonstrates Kyndryl's efforts to strengthen its position in the rapidly evolving cloud computing market, which has significant implications for businesses and industries worldwide. As companies increasingly rely on cloud services, Kyndryl's moves could influence the direction of the industry and impact the way organizations operate and innovate.

The acquisition of Skytap will expand Kyndryl's hybrid cloud services portfolio, enabling the company to help customers utilize cloud native services to accelerate the adoption of advanced analytics, artificial intelligence, and development, security, and operations (DevSecOps). Skytap's innovative technologies, which help companies run traditional on-premise systems such as IBM Power in Microsoft Azure or IBM Cloud, will be combined with Kyndryl's expertise to transition complex workloads to support hyperscaler environments.

Dave Simpson, Global Practice Leader for Cloud at Kyndryl, emphasized the strategic importance of the acquisition, stating, "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."

Skytap, founded 17 years ago in Seattle, has around 70 employees and has raised $18 million from Vistara Growth in October. Previous investors include Goldman Sachs, Madrona, Ignition Partners, and Amazon founder Jeff Bezos. Bradley Schick has been serving as the CEO of Skytap since 2019.

Concurrently, Kyndryl has entered into a definitive agreement to divest its Securities Industry Services (SIS) business, a transaction processing platform for the securities brokerage industry in Canada, to Broadridge Financial Solutions, Inc. The SIS platform offers a range of solutions, including clearing and settlement, account record keeping, tax and regulatory reporting, and integrated order management activities, catering to Canadian financial services firms. 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. The company expects to record a transaction-related gain (excluded from its adjusted results) in conjunction with the SIS divestiture, but the transactions have no impact on Kyndryl's fiscal year 2025 outlook, which was provided on May 7, 2024. Terms of the transactions were not disclosed.

The acquisition of Skytap and the divestiture of the SIS business reflect Kyndryl's strategic focus on optimizing its portfolio and investing in mission-critical capabilities. Kyndryl, which spun off from IBM in 2021, reported revenue of $3.8 billion for its most recent quarter, down 10% year-over-year but exceeding analyst expectations. The company also cut losses substantially from the year-ago period, resulting in a nearly 30% increase in its share price last week.

Key Takeaways

  • Kyndryl acquires Skytap to enhance hybrid cloud offerings.
  • Skytap's tech helps run traditional systems in hyperscaler environments.
  • Kyndryl divests Securities Industry Services (SIS) business to Broadridge.
  • Transactions aim to strengthen Kyndryl's position in cloud computing market.
  • Deal terms not disclosed; expected to have no impact on fiscal year 2025 outlook.