International Business Machines Corp (IBM) is nearing a deal with GlobalFoundries Inc for its chip-manufacturing business, according to people familiar with the matter, after searching for a buyer for the money-losing unit since last year.
GlobalFoundries is primarily interested in acquiring IBM’s engineers and intellectual property rather than manufacturing facilities, which have little value as they are more than a decade old, said people with knowledge of the matter, who asked not to be named because the talks are private.
GlobalFoundries, which has its own plant in New York state and a technology joint development project with IBM, will act as a supplier for IBM’s microprocessors, the people said. Terms of the deal were not available.
The chip-manufacturing business itself loses money for IBM — as much as US$1.5 billion a year, according to one of the people. IBM has been unloading less profitable businesses to help meet its earnings goals for next year amid eight consecutive quarters of declining revenue.
A deal would let IBM divest a business that has been a successful developer of fundamental process technology, yet failed to deliver the level of sales and profit on the manufacturing end that partners such as Samsung Electronics Co have achieved.
Earlier this year, IBM had turned its attention to finding a joint-venture partner for the business because such an arrangement would let IBM maintain control of the design and intellectual property of the chips, a person with knowledge of the matter said in February. The Armonk, New York-based company had been seeking a buyer for the division since at least last year, a person said at the time.
IBM chief executive Ginni Rometty is also trying to offload the firm’s low-end server unit, which Beijing-based Lenovo Group Ltd (聯想) agreed to buy for US$2.3 billion. The companies have sought more time for a US national security review of the deal, a person familiar with the matter said this month.
IBM’s semiconductors, which include the PowerPC lineup, have been used in personal computers, game machines and other equipment, but Intel Corp’s dominance in the processor market has left IBM with less of a role in the chip industry. Manufacturing microelectronics accounts for less than 2 percent of IBM’s US$100 billion in annual revenue.
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