International Business Machines Corp.’s (NYSE:IBM) troubles selling its cash sinkhole chip manufacturing business was discussed by Ian King in a recent interview on Bloomberg West.
The interview with King comes after his recent report on Bloomberg saying that International Business Machines Corp. (NYSE:IBM) rejected the offer made by Globalfoundries for its chip-making business. According to King in the report, people familiar with the talks between the two companies say that Big Blue rejected the offer because it was too low in the company’s opinion.
International Business Machines Corp. (NYSE:IBM) has been talking with Globalfoundries, a company owned by the Emirate of Abu Dhabi, about the possibility of the latter acquiring the former’s chip manufacturing operations. However, the talks have broken down, King said in his report.
According to King, this is a big deal for Big Blue as the company clearly sees itself going in a different direction. Whereas International Business Machines Corp. (NYSE:IBM) was into manufacturing of hardware in the past, the company is now looking toward technology services and the cloud as their main focus.
King was then asked why the company has this business and he said that they own the business because of their past which included making chips. However, this unit, he said, has been losing money for the company. The problem in the space for International Business Machines Corp. (NYSE:IBM), King added, is that foundries for chips are expensive to build, easily depreciate and are notoriously costly to update.
The Bloomberg reporter noted that Globalfoundries seemed to have been interested in the business for a possible acquisition because of the talent and the research that they would have acquired and not the manufacturing facilities involved in the deal.
Watch the discussion below where more of the troubles of IBM with this business arm were scrutinized.