Dubai
Global Foundries, owned by the Mubadala Development Co, will acquire the loss-making semiconductor unit of IBM and the $1.5 billion deal will make the Abu Dhabi government’s investment fund the holder of one of the largest semiconductor patent portfolios in the world.
Global Foundries, which manufactures chips to order for other companies, will gain substantial intellectual property, including thousands of patents, with this deal.
“The acquisition solidifies our leadership position in semiconductor technology development and manufacturing,” said Dr Sanjay Jha, CEO of Global Foundries, said in an emailed statement to Gulf News.
Neither IBM nor Global Foundries was available for comments at the time of going to the press.
IBM will pay $1.5 billion in cash over the next three years and it will reflect a pre-tax charge of $4.7 billion in its financial results for the third quarter of this year, which includes asset impairment, estimated costs to sell the IBM microelectronics business, and cash consideration to Global Foundries.
The cash consideration will be adjusted by the amount of working capital which is estimated to be $200 million.
IBM is looking for ways to increase margins as its revenue growth is slowing in the chip business, mainly used in personal computers, game machines and other equipment as Intel dominates the processor market.
It has been shedding its hardware business and has closed a deal with Lenovo to sell its x86 server business for $2.1 billion earlier this month.
Global Foundries has robust capital expenditure plans of approximately $10 billion in 2014-2015, with the majority being invested in New York.
“We can now offer our customers a broader range of differentiated leading-edge 3D transistor and radio frequency (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 US, and builds on established relationships in New York and Vermont,” Jha said.
Dr John E. Kelly III, senior vice-president and director of research at IBM, said that the acquisition enables IBM to focus on fundamental semiconductor and material science research, development capabilities and expertise in high-value systems.
Global Foundries will take over IBM’s manufacturing operations in East Fishkill, New York and Essex Junction, Vermont, and offer jobs to substantially all IBM employees at the two facilities who are part of the transferred businesses, except for a team of semiconductor server group employees who will remain with IBM.
It will also acquire IBM’s commercial microelectronics business, which includes application-specific integrated circuit (ASIC) and specialty foundry, manufacturing and related operations and sales.
IBM, which was expected to report its third-quarter results late last night, saw its second-quarter revenue down two per cent to $24.4 billion compared to $24.9 billion during the same period last year while its revenue from systems and technology hardware segment for the second quarter also fell 11 per cent to $3.3 billion.
Ginni Rometty, CEO of International Business Machines Corp, said it will no longer reach its earnings forecast for 2015, ditching a five-year profit goal as the company struggles to transform quickly enough to cope with an industry-wide shift to the cloud-computing era.
IBM said it will provide an update on its 2015 projections in January
“We are disappointed in our performance,” Rometty said.
