News hit the wire this weekend that IBM is going to pay GlobalFoundries $1.5 billion to take its loss-making chip manufacturing operation of its hands. IBM will receive $200 million worth of assets, making the net value of the deal $1.3 billion. Under the deal, GlobalFoundries will supply IBM with Power processors for its mainframe computers and Watson data-analytics technology in exchange for access to IBM's chipmaking related intellectual property.
IBM will also receive $200 million worth of assets, making the net value of the deal $1.3 billion, said the people who asked not to be identified because the agreement is private. The companies plan to announce the deal today, the people said. IBM put out a statement yesterday saying it planned to make a “major business announcement” today.
After months of on-again, off-again talks, IBM Chief Executive Officer Ginni Rometty finally struck a deal to jettison the chipmaking unit, which has been a drag on earnings. Globalfoundries, owned by an investment arm of the government of Abu Dhabi, is taking on the unit to tap the expertise of its engineers in the fundamentals of semiconductor design and manufacturing.
Intel and TSMC were reportedly not interested in taking over the plant, and efforts to find a joint-venture partner resulted in a dead end. The chip making division was one of IBM's worst performing units, it resulted in just 2 percent of the company's revenue and lost IBM up to $1.5 billion a year.