IBM to pay $1.5 billion to offload chip-making business

Big Blue looks set to hive off firm to Globalfoundries

IBM System x3550 M4

IBM has reached a $1.5 billion agreement with Globalfoundries to take over its processor business.

The firm put out an advisory yesterday saying that it would announce something important alongside its third quarter results.

Its semiconductor business has long been a drain on IBM's revenues with the firm also getting into talks with Intel and Taiwan Semiconductor Manufacturing with a view to shedding the company. IBM has reportedly been looking for a buyer since last year.

The deal with Globalfoundries means Big Blue is paying it to take the loss-making arm off its hands. According to a report from Bloomberg, IBM will also receive $200 million in assets to offset the cost to $1.3 billion.

The deal was hindered over disagreements between the two on how much IBM would pay Globalfoundries. The latter wanted $2 billion and IBM offered half that amount. It looks like the two agreed to split the difference.

With the deal, Globalfoundries, which is owned by an Abu Dhabi sovereign wealth fund, will be able to exploit the expertise of its engineers in the details of the design and production of semiconductors.

The deal will include a 10-year partnership between the two firms. Globalfoundries will supply Power chips and IBM will give access to its intellectual property.

For GlobalFoundries, the deal is more about getting hold of the design talent rather than the manufacturing facilities.

It will guarantee Globalfoundries as a supplier of processors to power IBM's mainframe machines and its Watson AI technology. It will also assume control of a manufacturing plant in Fishkill, New York, a smaller factory in Vermont, as well as 5,000 employees.

Featured Resources

B2B under quarantine

Key B2C e-commerce features B2B need to adopt to survive

Download now

The top three IT pains of the new reality and how to solve them

Driving more resiliency with unified operations and service management

Download now

The five essentials from your endpoint security partner

Empower your MSP business to operate efficiently

Download now

How fashion retailers are redesigning their digital future

Fashion retail guide

Download now

Recommended

IBM teams with Scale Computing to deliver edge solutions at scale
hybrid cloud

IBM teams with Scale Computing to deliver edge solutions at scale

21 Jul 2021
IBM acquires hybrid data firm Bluetab Solutions
mergers and acquisitions

IBM acquires hybrid data firm Bluetab Solutions

15 Jul 2021
IBM snaps up DevOps services specialist BoxBoat
DevOps

IBM snaps up DevOps services specialist BoxBoat

9 Jul 2021
Jim Whitehurst stands down as IBM president
cloud computing

Jim Whitehurst stands down as IBM president

6 Jul 2021

Most Popular

The benefits of workload optimisation
Sponsored

The benefits of workload optimisation

16 Jul 2021
Samsung Galaxy S21 5G review: A rose-tinted experience
Mobile Phones

Samsung Galaxy S21 5G review: A rose-tinted experience

14 Jul 2021
IT Pro Panel: Why IT leaders need soft skills
professional development

IT Pro Panel: Why IT leaders need soft skills

26 Jul 2021