International Business Machines Corp. (IBM) Reattempting To Sell Money-Losing Chip-Manufacturing Unit


International Business Machines Corp. (NYSE:IBM) continue the trend of unloading their non-profitable business. In a recent announcement, they sold a low end server unit to Lenovo Group Limited. IBM made one such attempt to sell its chip-manufacturing unit to GLOBALFOUNDRIES U.S. Inc. But the deal was broken down in July due to disagreement between the two companies on payments. Brittany Umar reported on ‘The Street’ that IBM has resumed their talks with GLOBALFOUNDRIES U.S. Inc. with an upgraded deal.

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Umar mentioned that International Business Machines Corp. (NYSE:IBM) is reportedly back in talks with GLOBALFOUNDRIES U.S. Inc. for the deal to sell its money losing chip-manufacturing unit. IBM was ready to pay $1 billion to GLOBALFOUNDRIES U.S. Inc. to cover the losses of the manufacturing unit, but reports suggested that GLOBALFOUNDRIES U.S. Inc. demanded $2 billion, which stalled the talks between the two companies in July.

“[….] IBM is now willing to pay GLOBALFOUNDRIES more than the $1 billion it previously offered the semiconductor foundry to take over the unit, according to Bloomberg, which cited a person familiar with the matter. Talks between the two broke down in July, when GLOBALFOUNDRIES reportedly wanted about $2 billion to take the unit, which would offset the money-losing division’s losses,” Umar said.

Umar also mentioned that International Business Machines Corp. (NYSE:IBM) selling its chip-manufacturing unit does not show their intention to get completely out of the chip business. She pointed at the IBM’s announcement in July about investing $3 billion for research & development in computer chips.

Umar added that International Business Machines Corp. (NYSE:IBM) refused to comment on the leaked reports.  IBM’s intention behind selling these money-losing or low revenue businesses is mainly to concentrate on the blooming sectors such as cloud computing and data analytics.

As of 30 June 2014, Warren Buffett’s Berkshire Hathaway hold around 70 million International Business Machines Corp. (NYSE:IBM) shares.

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