IBM has reportedly agreed to pay $1.5 billion to Globalfoundries to take the unprofitable chip manufacturing business off its hands.
Globalfoundries is owned by the Abu Dhabi sovereign wealth fund and was a spin-off from AMD in 2009. After this deal, the chip manufacturer will be the second largest foundry business after Taiwan’s TSMC.
As part of the deal, IBM will also receive $200 million worth of assets, making the net value of the deal $1.3 billion, said the people who asked not to be identified because the agreement is private.
The companies plan to announce the deal today, the people said. IBM put out a statement yesterday saying it planned to make a “major business announcement” today.
After months of on-again, off-again talks, IBM Chief Executive Officer Ginni Rometty finally struck a deal to jettison the chipmaking unit, which has been a drag on earnings. Globalfoundries, owned by an investment arm of the government of Abu Dhabi, is taking on the unit to tap the expertise of its engineers in the fundamentals of semiconductor design and manufacturing.
In a 10-year partnership, Globalfoundries will supply IBM with Power processors in exchange for access to IBM’s intellectual property, the people said. That would allow Globalfoundries to access key chipmaking technology and guarantee supply of chips that IBM needs for its systems, like mainframe computers and its Watson data-analytics technology.
IBM will pay Globalfoundries the $1.5 billion over three years, the people said. IBM had been seeking a buyer for its chipmaking division since at least 2013, a person with knowledge of the unit said in February. Earlier this year, the company was focused on finding a joint-venture partner after failing to attract an acquirer, two people familiar with the matter said at the time.
