IBM Divests Semiconductor Business in $1.5 Billion Deal
- By Chris Paoli
- October 20, 2014
IBM on Monday announced it will pay semiconductor manufacturer GlobalFoundries $1.5 billion to take over IBM's struggling chip business.
The divestment of its semiconductor unit is expected to be finalized sometime in 2015. The move will free IBM to focus on other areas, according to the company.
"The Agreement, once closed, enables IBM to further focus on fundamental semiconductor research and the development of future cloud, mobile, big data analytics, and secure transaction-optimized systems," IBM said in a press release.
In addition to the $1.5 billion, GlobalFoundries will also have access to the remainder of a $3 billion investment over five years that IBM had promised for semiconductor research. GlobalFoundries will also receive thousands of IBM patents and will operate IBM's semiconductor manufacturing plants located in New York and Vermont.
Founded in 2009, GlobalFoundries made news in January when it announced the appointment of former Motorola Mobility CEO Sanjay Kumar Jha to its CEO position. According to a Bloomberg report, Jha had spent most of his time at the company finalizing this deal, and GlobalFoundries initially sought $2 billion from IBM to offset the chip division's losses.
The announcement coincides with a weak IBM financial report for the third quarter. IBM reported revenue of $2.4 billion for the quarter, a decline from $4.1 billion earned during the same period last year. Shares for IBM are also down 40 cents compared to last year and currently sit at $3.68 per share.
"We are disappointed in our performance," said Ginni Rometty, IBM's CEO, president and chairman, in a released statement. "We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry."
This is the second major cut IBM has made this year to its overall business; in January the company sold its x86 server business to hardware manufacturer Lenovo for $2.3 billion.