Under pressure to boost margins, IBM is set to make what it calls a “major business announcement” Monday morning, raising the possibility that it has finalized a deal to transfer chip-making operations to GlobalFoundries.
IBM announced Sunday that it would be issuing its quarterly earnings statement early Monday, moving it up from its previous schedule, timed for after the close of markets. The company said it would also separately make a business announcement.
IBM CEO Ginni Rometty is looking for ways to increase margins as revenue growth slows while it transitions to new technology and services offerings. One way to do this is to shed less profitable parts of the business. The company’s chip manufacturing operations in East Fishkill, New York, is one of them.
Reports surfaced this summer that IBM was working on a deal to have GlobalFoundries take over the plant. The deal fell though at the time, however, over disagreement on the amount of money IBM would pay GlobalFoundries to take over the money-losing fab, reports said. IBM was offering $1 billion, but GlobalFoundries wanted $2 billion, according to a Bloomberg report.
IBM has been steadily shedding its hardware assets and is closer to taking on a chip licensing model approach much like ARM Holdings. IBM earlier this month closed a deal to sell its x86 server business to Lenovo for $2.1 billion. Its hardware business now centers around Power architecture, which is best known for powering the Watson supercomputer, which outwitted humans in the TV game show “Jeopardy.”
For decades, IBM made Power servers in-house, but is now working with other hardware makers to bring the chip architecture to more servers. IBM last year started licensing Power architecture so third-party companies can develop chips, servers and components. It also formed the OpenPower Foundation—which boasts Samsung, Google, Tyan and Nvidia as members—to promote Power-based software and hardware development.
If the deal with GlobalFoundries goes through, IBM will likely move the manufacturing of its Power chips into the hands of the Santa Clara, California, company. GlobalFoundries has many factories worldwide including, one in Malta, New York. IBM would also further reduce the size of the company’s Systems and Technology Group, which is responsible for hardware.
The Emirate of Abu Dhabi is the owner of the company through its subsidiary Advanced Technology Investment Company(ATIC).
Advanced Technology Investment Company (ATIC) is an investment company in the high-technology sector,owned by Mubadala Development Company, a wholly owned investment vehicle of the Government of Abu Dhabi, in the United Arab Emirates.
ATIC wholly owns GlobalFoundries, the world’s second largest semiconductor foundry company by revenue.
Mubadala’s mandate is to facilitate the diversification of Abu Dhabi’s economy. Its focus is on managing long-term, capital-intensive investments intended to deliver strong financial returns and tangible social benefits for the Emirate.
International Business Machines Corp. plunged to a three-year low after abandoning an earnings forecast for 2015, as the company struggles to transform fast enough to handle the shift to cloud computing.
IBM said it will provide an update on its projections in January, ditching a five-year plan to boost profit. The shares tumbled 7.1 per cent, dragging down the Dow Jones Industrial Average. Warren Buffett, IBM’s biggest shareholder, had $US900 million of his investment wiped out.
While Chief Executive Officer Ginni Rometty had been banking on a strong second half of the year, IBM instead faced weaker-than-expected software sales and lower productivity in services in the third quarter. With technology customers moving from owning hardware to storing data in the cloud, IBM is now cutting more jobs, reducing its forecast for free cash flow and handing over an unprofitable chip unit to Globalfoundries Inc.
“Obviously we were disappointed in this quarter,” Rometty said on a conference call today with analysts, adding that the company is facing “unprecedented change” in the industry. “We have more to do and we need to do it faster.”
IBM to transfer its chip making division is a sign of the times..the stock market didnt like the profit falls either..
look who is getting it..globalfoundries who is owned by abu dhabi’s government backed investment company ATIC who is owned by mubadala and havent they got a cute logo..as above so below..