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IBM’s IT services spin-off, Kyndryl, hits the market today

November 4, 2021, 10:02 AM UTC

Good morning.

A new future Fortune 500 company hits the market today—Kyndryl, the spin-off of IBM’s IT services business (under Fortune rules, Kyndryl won’t officially be on the list until 2023). This is the very business former IBM CEO Louis Gerstner built up a quarter century ago to help “save” the 110-year-old computer maker. But today, salvation requires a different pivot—to the “hybrid” cloud that has become IBM’s focus. The elephant must keep dancing.

Martin Schroeter was called out of retirement to become CEO of Kyndryl. I spoke to him last week, and he said that while IBM’s IT services business has been shrinking, he thinks Kyndryl’s independence will give it the opportunity to build new customers and grow. “When you think about infrastructure services as a whole, it’s a growing industry,” he said. “Right now, we are overweight in the industries IBM worked with, but this will allow us to move to companies in the public cloud infrastructure.” He said he expects “2025 to be a pivotal year. It takes about three years to return to growth.”

The new company launches with 90,000 employees in 63 countries and revenues just under $20 billion. That should put it somewhere around the 150 mark in next year’s Fortune 500 list.

Separately, Fortune Editor-in-Chief Alyson Shontell and I had lunch yesterday with L’Oreal CEO Nicolas Hieronimus and U.S. CEO Stephane Rinderknech at L’Oreal’s offices at Hudson Yards.  This was a post-pandemic first on several levels: Hieronimus’s first visit to the U.S. since becoming CEO, my first joint interview with Fortune’s new editor, and both of our first meal in a corporate dining room since before the pandemic. New York life is moving back towards normal.

Hieronimus talked about how the pandemic accelerated trends that the cosmetics company was already investing in: an increased focus on digitization of commerce and consumer engagement; an increased focus on health and safety; and an increased focus on sustainability. As a result, the company has seen its business grow at twice the rate of the overall market. At the moment, L’Oreal is benefitting from a boom in fragrances, to scent the return to real life.

On sustainability, L’Oreal has committed to reach carbon neutrality at all of its sites by 2025, and to rid virgin plastics from its packaging by 2030. When I asked him whether customers rewarded the company for that commitment, he responded:

“Today, consumers say they care, but it doesn’t always show in their actions. I think that will change over time. And I would say our employees care, massively.”

Asked about how L’Oreal balances financial goals and social goals, Hieronimus said:

“Today we have to run on two legs: financial performance and social performance. Any company that forgets the first one can’t help on the second one.”

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

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This edition of CEO Daily was edited by David Meyer.

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