IBM Reportedly Near Deal to Sell Chip Manufacturing Unit to Globalfoundries


International Business Machines Corp. (NYSE:IBM) is close to entering an agreement with Globalfoundries Inc regarding the sale of its chip manufacturing business, according to Bloomberg based on information from people familiar with the situation.

The multinational technology and consulting company had been looking for a buyer for its chip manufacturing unit since last year. The business units’ manufacturing facilities are already more than 10 years old and have little value, but Globalfoundries is primarily attracted to its intellectual property rights and engineers.

International Business Machines Corp. (NYSE:IBM) and Globalfoundries are working together in a technology development project. According to the people familiar with the matter, Globalfoundries has a plant in the state of New York and it will serve as supplier for IBM’s microprocessors.

One of the sources said, International Business Machines Corp. (NYSE:IBM) is suffering as much as $1.5 billion in losses from its chip manufacturing business. The multinational technology and consulting firm had been disposing some of assets that are less profitable to be able to meet its $20 earnings per share target for 2015. IBM’s revenue has been declining over the past eight consecutive quarters.

IBM CEO Ginni Rometty admitted that the company failed to meet its expectations last year, and it needs to resolved the challenges confronting its hardware business by shifting for new realities and opportunities.

Last February, the company cut jobs and agrees to sell its low-end server business to Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) for $2.3 billion as part of its strategies to meet its $20 EPS target next year.

International Business Machines Corp. (NYSE:IBM) failed to generate profit and revenue that are comparable with the performance of its partners such as Samsung Electronics Co. Ltd. (KRX:005935) from the manufacturing side of the business unit, but it has been a successful developed of fundamental process technology.

One person familiar with the matter said the multinational technology and consulting company considered looking for a joint-venture partner for its chip manufacturing business earlier this year. International Business Machines Corp. (NYSE:IBM) will be able to continue to control the design and intellectual property of the chips under a joint-venture deal.

Its spokesperson Kevin Kimball told Bloomberg that Globalfoundries does not comment on rumors or speculations when asked about the potential acquisition deal with IBM.