International Business Machines Corp. (IBM) Ready to Reinitiate Talks to Spin off its Ailing Chip Unit

International Business Machines Corp. (IBM)

International Business Machines Corp. (NYSE:IBM) is likely to resume its discussion with Globalfoundries Inc to spin off its chip-manufacturing unit. This is the second time these two companies are entering negotiations as Globalfoundries rejected IBM’s $1 billion offer to take the unit during previous discussions in July.

According to the sources, International Business Machines Corp. (NYSE:IBM) is ready to pay a higher amount to offload its money-losing chip segment. This move indicates company’s determination to cutoff its unprofitable businesses in near future, although both the involved parties declined to comment over the discussions. However, getting rid of its chip unit doesn’t mean that the company is likely to stop its investments in semiconductor research and development, as it announced investment of $3 billion in the segment over the next five years.

International Business Machines Corp. (IBM)

Ginni Rometty, CEO of IBM, is facing immense pressure to meet the financial targets of 2015 considering the fact that the technology giant has maintained a dropping revenue streak for the last nine quarters. During their previous negotiation, Globalfoundries Inc, owned by an investment vehicle of the Abu Dhabi Government, was interested in the engineers and intellectual property of International Business Machines Corp. (NYSE:IBM).

At the same time, it didn’t place any value to the chip manufacturing unit of the company considering their old manufacturing machinery, which wouldn’t serve much purpose for the leading-edge chip manufacturer. Globalfoundries Inc was expecting $2 billion to take over the operations of the ailing IBM chip-manufacturing unit. The chip manufacturing unit of IBM contributed less than 2 percent in the overall revenue of the company last year.

Earlier, IBM launched its big data analytics product Watson Analytics, for corporate users. The application is cloud-based with the ability to retrieve, analyze, and organize data in a user-readable format. It is based upon natural language queries to ease its usage and one of the IBM’s divisions, Watson Business Group, prepared the application.

This article has been written by Prakash Pandey and edited by Serkan Unal.

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