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Bloomberg: IBM Nears Deal With Globalfoundries For Chip-making Business

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Technology giant International Business Machines Corp. (IBM: Quote) is nearing a deal with Globalfoundries Inc. for its chip-making business, Bloomberg reported Tuesday, citing people familiar with the matter.

According to the Bloomberg report, Santa Clara, California-based Globalfoundries is primarily interested in acquiring IBM's engineers and intellectual property, rather than its manufacturing facilities that are more than a decade old. The terms of the deal were reportedly not available.

Globalfoundries has its own plant in New York state and a technology joint development project with IBM. The company will reportedly act as a supplier for IBM's microprocessors.

Globalfoundries was created in 2009 by the divestiture of the manufacturing arm of Advanced Micro Devices, Inc. (AMD) and expanded through the acquisition of Singapore's Chartered Semiconductor in 2010. The Emirate of Abu Dhabi is the owner of the company.

Media reports earlier this year indicated that New York-based IBM was exploring a sale of its semiconductor business and hired Goldman Sachs to seek potential buyers as well as assist in the sale process.

According to the media reports, IBM was not fixed to the idea of selling the semiconductor business and would also scout for a suitable partner to form a joint venture to run the business. The business includes the PowerPC lineup that has been used in personal computers, fame machines and other equipment.

Most of the companies are exiting the semiconductor-manufacturing business due to the exorbitant cost of building newer generation of advanced fabrication plants.

There are only a handful of companies are currently in semiconductor manufacturing, such as giants South Korean Samsung Electronics Co., Ltd. (SSNLF), Intel Corp. (INTC) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) as well as Globalfoundries. One of these companies are seen ending up as the most likely acquirer of IBM's Semiconductor business.

IBM agreed in January 2014 to sell its x86 server business to Chinese PC maker Lenovo Group Ltd. (LNVGY) for about $2.3 billion in a cash and stock deal. IBM earlier agreed to sell its customer relationship management BPO operations to BPO company Synnex Corp. (SNX).

IBM has been divesting less profitable businesses and expanding into providing software and services. In mid-April, IBM reported a 21 percent decline in profit for the first quarter from last year, hurt by lower revenue and a workforce rebalancing charge.

IBM closed Tuesday's trading at $184.29, down $1.93 or 1.04 percent on a volume of 4.16 million shares.

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by RTT Staff Writer

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