IBM to pay $1.5 billion to offload chip-making business
Big Blue looks set to hive off firm to Globalfoundries
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.
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