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IBM dumps its chipmaking unit on Globalfoundaries

by on20 October 2014

Paid to get rid of it

Biggish Blue is so keen to offload its loss-making semiconductor unit it has paid contract-chipmaker Globalfoundries to take it away.

According to the Wall Street Journal, IBM will pay Globalfoundries $1.5 billion to take the chip operations off its hands. It is expected to make the formal announcement later today when IBM is also scheduled to report its third-quarter earnings.

Talks between IBM and Globalfoundries has been going on for a while. Biggish Blue has been frustrated that it cannot make its semiconductor operations. IBM still makes chips for some of its computers and for some external customers. IBM asked Intel first, but Chipzilla was not interested. Neither was Taiwan Semiconductor Manufacturing. Only Globalfoundries was interested in keeping the plant.

IBM initially hoped to sell the operations for more than $2 billion, the people said, but bidders were coming in closer to $1 billion. Talks with Globalfoundries at times were marked by disagreements over financial terms, one person familiar with the talks said.

Then IBM remembered that it still had to make some chips and it would need to pay Globalfoundries to do it and by the time it factored in all that, it would end up owing Gloflo money.

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