International Business Machines Corp. (IBM) Ready to Pay Up To $1.5 Billion For Its Chip Unit

It didn’t came as much of a surprise for the market when International Business Machines Corp. (NYSE:IBM) announced to pay $1.5 billion to Globalfoundries for taking its blue chip unit. The technology company was in talks with Globalfoundries for the past several months considering its ailing chip manufacturing business.

International Business Machines Corp. (NYSE:IBM) gave a hint of a “major business announcement” on Monday and the company is likely to report its third quarter earnings too. According to resources, the tech company would receive assets worth $200 million, which puts the deal at $1.3 billion for the company. The aging machinery and need of upgrades forced the company to sell off its chip-manufacturing unit.

International Business Machines Corp. (IBM)

Globalfoundries, Abu Dhabi government owned firm, is likely to acquire the ailing business and use it to expand its footprint in semiconductor design and manufacturing industry. The chipmaker is likely to acquire Fishkill and Vermont manufacturing units of IBM along with its 5,000 workers under the agreement.

What seems dramatic is that International Business Machines Corp. (NYSE:IBM) was initially seeking up to $2 billion for its semiconductor manufacturing unit but with failed negotiation with Globalfoundries and multiple issues concerning intellectual property rights as well as the financial terms of the deal, it is likely to pay $1.5 billion to get rid of the loss-making unit.

Earlier, IBM was considered the leader in Enterprise Mobile Management business in a report “The Forrester Wave™: Enterprise Mobile Management, Q3 2014,” prepared by Forrester Resarch. Analyst at Forrester research stated that

“the Leaders balance OS, app and data management functionality while providing flexible container options and productivity apps, and have demonstrated a strong vision and road map to help customers bring their PC and mobile management strategies together.”

The report offered a top spot to the company in ‘the current offering category for strengths across criteria such as architecture and scale, mobile platform support, reporting and analytics, containerization, data management and security, and app security.’

This article has been written by Prakash Pandey.

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