Globalfoundries reportedly turned down $1 billion in cash to take over IBM's chip-making business

By Shawn Knight ยท 6 replies
Aug 6, 2014
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  1. IBM CEO Ginni Rometty was hoping Globalfoundries would be willing to take over its chip-making business. The company even offered $1 billion in cash to jettison the division - an offer that Globalfoundries turned down according to a person familiar...

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  2. wastedkill

    wastedkill TS Evangelist Posts: 1,423   +350

    IBM Give me $1billion in cash and I will take over your chip making business or better yet $750million that'l save ya some cash :)

    How can someone say no to $1billion and be THAT greedy to ask for double from the people trying to give it away to you with free cash... its like someone turning down taking sony with $10billion in free cash... like seriously how god damn greedy & stupid do you have to be to 1. not take a free ready built business and 2. say no to $1billion free cash...

    if IBM seriously wanted to get rid of their chip making business would it not be like 99.8% cheaper just to dump the lot instead of give it away with cash?
  3. dividebyzero

    dividebyzero trainee n00b Posts: 4,891   +1,264

    Probably not that simple. IBM's foundries are getting on in years and likely need repurposing for smaller process nodes. With the next generation of lithography tools reported costing around $200 million apiece, refurbishing a single foundry runs into billions of dollars.
    IBM also has some pressing issues with getting a competitive process up and running. Intel is already at 14nm and 10nm, Samsung's 14nm FinFET has also been licensed to GloFo, UMC also has 14nm FinFET close to market, as well as TSMC's 16nmFF / FF+.
    It's a crowded market with vendors who have a better track record than does IBM of late.
    Classic poisoned chalice scenario.
    Probably isn't an option with existing contracts that still require fulfilling.
  4. NicktheWVAHick

    NicktheWVAHick TS Booster Posts: 106   +84

    I'll take it for 500K cash, payoff my mortgage and then torch the whole facility.
  5. mctommy

    mctommy TS Addict Posts: 217   +38

    If the unit is losing $1.5billion a year, it's much more complicated than a simple take it and dismantle. People fail to understand that there are ongoing commitments and liabilities that you can't just easily get rid of... thus IBM giving $1billion along with the unit which would lighten the loss column for IBM for the future and IBM won't have to upgrade the facilities which also cost a fortune.

    If it was so simple, plenty of companies would line up for the pay day and "destroy" the unit.
    davislane1 likes this.
  6. You guys are saying you will make better decisions, based on 5 paragraphs, than the companies involved. There is a good reason IBM will give a billion and Global Foundries refused to take it. They both predict futures liabilities of over a billion.
  7. Blue Falcon

    Blue Falcon TS Addict Posts: 161   +51

    @ wastedkill

    If the company generates negative FCF from operations, it's just a matter of time before the $1B cash injection to purchase a business is used up and what you are left with is a business that continues to lose $ during operations. Therefore, you are actually asking someone to take $1B to keep losing multiples of that over longer periods of time. Without a proper restructuring plan in place, no one takes over a failing business. Not to mention that GloFo themselves have struggled in the last 4 years to turn their own company around.

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