IBM is paying Abu Dhabi-based Globalfoundries $1.5 billion to unload its loss-making chip manufacturing division, according to a Bloomberg report. Both companies plan to announce the deal today.
Big Blue has been looking for a buyer since 2013. After it failed to find one last year, the company focused on finding a joint-venture partner, offering Globalfoundries $1 billion earlier this year to take up the division. The offer was turned down by the latter, which wanted about $2 billion to compensate for the unit’s losses. After months of talks, the deal was finally struck at $1.5 billion.
As per the terms of the deal, IBM will pay the amount over three years, and will receive $200 million in assets, making the net value of the deal $1.3 billion. The two companies have also signed a 10-year supply contract, as part of which Globalfoundries will get access to IBM's intellectual property, and will in return supply the latter with Power processors, something IBM requires for its systems, like mainframe computers and its Watson data-analytics technology.
Although IBM is shedding off its chip manufacturing business, which makes up just two percent of the company’s revenue and loses as much as $1.5 billion a year, the company isn't backing out of the field, as it has plans to invest $3 billion on semiconductor R&D in the next five years, the report said.
In addition to the deal, IBM will also announce its third-quarter results today, with Wall Street expecting a per-share profit of $4.32 on sales of $23.4 billion.