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You are here: Home / Computing / IBM Pays $1.5B To Dump Chip Unit
IBM Pays $1.5 Billion To Dump Loser Chip Unit
IBM Pays $1.5 Billion To Dump Loser Chip Unit
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Big Blue is selling off another piece of itself -- and paying a large sum to do it. IBM is shelling out $1.5 billion in cash over the next five years to GlobalFoundries, a full-service semiconductor foundary, in a move to spin off its chip division. IBM shares are down 7.5 percent in morning trading.

As part of the deal, GlobalFoundries will become IBM’s exclusive server processor semiconductor technology provider for 22nm (nanometer), 14nm and 10nm semiconductors for the next 10 years. The deal aims to let Big Blue move deeper into areas like the cloud, mobile, big data, analytics, and secure transaction-optimized systems.

“This acquisition enables IBM to focus on fundamental semiconductor and material science research, development capabilities and expertise in high-value systems, with GlobalFoundries’ leadership in advanced technology manufacturing at scale and commitment to delivering future semiconductor technologies,” said IBM Senior Vice President and Director of Research John Kelly.

IBM’s shift toward big data, cloud and mobile is nothing new. The company has already announced it was earmarking $3 billion over the next five years for semiconductor technology research to lead in the next generation of computing.

What GlobalFoundries Gets

Under the terms of the agreement, GlobalFoundries gets primary access to the search from IBM’s joint collaboration at the Colleges of Nanoscale Science and Engineering, SUNY Polytechnic Institute, in Albany, NY.

GlobalFoundries also gets intellectual property assets, including thousands of patents. In fact, after the deal closes the firm will hold one of the largest semiconductor patent portfolios in the world. The firm also wins semiconductor technical talent to help it develop advanced process geometries at 10nm and below. In addition, it has an open door for business opportunities in industry-leading radio frequency and specialty technologies and ASIC design capabilities.

“We can now offer our customers a broader range of differentiated leading-edge 3D transistor and RF technologies, and we will also improve our design ecosystem to accelerate time-to-revenue for our customers,” said Sanjay Jha, CEO of GlobalFoundries. “This acquisition further strengthens advanced manufacturing in the United States, and builds on established relationships in New York and Vermont.”

GlobalFoundries will acquire and operate existing IBM semiconductor manufacturing operations and facilities in East Fishkill, New York and Essex Junction, Vermont. The firm plans to invest about $10 million in 2014 and 2015 in the U.S., mostly in New York.

A Good Move

“For IBM maybe this is a little bit of back to the future again,” Zeus Kerravala, principal analyst at ZK Research, told us. “A few decades ago IBM had to reinvent itself and became a massive services company. Obviously there’s a big shift in the industry going on toward cloud and mobility.”

As Kerravala sees it, IBM is not strong enough in cloud and mobility -- and if the company wants to go deeper into these areas, it needs to shed some old divisions. With that in mind, he said the chip division is probably better off in the hands of GlobalFoundries, which is a chip manufacturer.

“For IBM, it’s about doing the things they do and doing them well versus doing everything and doing everything mediocre,” Kerravala said. “That’s what we’re seeing here with some of the shedding of some of these businesses, including the server line to Lenovo. It’s probably the right thing for them to do. They need to have some focus now and take advantage of some of these emerging trends versus watching them happen.”

Tell Us What You Think


Goetz Oertel:
Posted: 2014-10-20 @ 11:10am PT
They give away a huge part of the IBM store - and pay a huge cash bonus to boot. I'm glad to be out of IBM just now and plan to keep it that way unless the company can do a better job of explaining this deal.

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