Globalfoundries is Buying IBM's Chip Business for Negative $1.5 Billion

[[Coi] Mr.CLuBBeR]

Say what now?

Think you could sell ice to an Eskimo? Hey, that would be an impressive demonstration of your ability to make a sale, though it pales in comparison to Globalfoundries deal with IBM. As odd as it may sound on the surface, IBM today announced that it's offloading its semiconductor business to Globalfoundries, along with $1.5 billion in cash to be paid over the next three years.
You read that right -- IBM is essentially paying Globalfoundries to take control of its chip business. On top of that, IBM will go through with its previously announced $3 billion investment over five years for semiconductor technology research, of which Globalfoundries will have primary access to.
It's an unusual move, and on the surface, one would be excused for thinking IBM had gone and lost it marbles. However, IBM can justify the transaction because of two reasons.
"While IBM has world-class technology and intellectual property, the company has lacked scale," IBM stated in a regulatory filing. "As a subscale business, IBM's microelectronic business has been generating losses."
The semiconductor business had become a burden on IBM. By getting rid of it, IBM plans to further focus on fundamental semiconductor research and the development of future cloud, mobile, big data analytics, and secure transactions-optimized systems.
As part of the deal, Globalfoundries gains all kinds of intellectual property, including thousands of patents.
"This acquisition solidifies Globalfoundries' leadership position in semiconductor technology development and manufacturing," said Dr. Sanjay Jha, CEO, Globalfoundries. "We can now offer our customers a broader range of differentiated leading-edge 3D transistor and RF technologies, and we will also improve our design ecosystem to accelerate time-to-revenue for our customers. This acquisition further strengthens advanced manufacturing in the United States, and builds on established relationships in New York and Vermont."
IBM posted a profit of $3.5 billion for its fiscal third quarter of 2014, down 17 percent from $4.1 billion in the same quarter a year ago. Straight and to the point, IBM CEO Ginni Rometty said "We are disappointed in our performance," noting a marked slowdown in client buying behavior during the month of September.
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