this Tuesday, July 16, 2013, file photo, an IBM logo is
displayed in Berlin, Vt. IBM is paying $1.5 billion to
Globalfoundries in order to shed its costly chip division.
IBM will make payments to the chipmaker over three years,
but it will take a $4.7 billion charge in the third quarter
when it reports results, Monday, Oct. 20, 2014.
NEW YORK — IBM
will pay $1.5 billion to Globalfoundries in order to shed its
costly chip division.
IBM Director of
Research John E. Kelly III said in an interview Monday that
handing over control of the semiconductor operations will allow it
to grow faster, while IBM continues to invest in and expand its
IBM will make
payments to the chipmaker over three years, but it took a $4.7
billion charge for the third quarter when it reported earnings
The company fell
short of Wall Street profit expectations and revenue slid 4
percent, sending shares down 8 percent before the opening bell.
The tech sector
is under heavy pressure in early trading, with IBM, Microsoft
Corp., Intel Corp. and Cisco all moving lower.
Globalfoundries will get IBM's global commercial semiconductor
technology business, including intellectual property and
technologies related to IBM Microelectronics. It also gets IBM's
semiconductor manufacturing operations and plants in East
Fishkill, New York and Essex Junction, Vermont, as well as access
to thousands of patents and IBM's commercial microelectronics
said that it plans to employ substantially all IBM workers at the
East Fishkill and Essex Junction plants, except for a team of
semiconductor server group employees who will stay with IBM.
agreement, Globalfoundries will become IBM's exclusive server
processor semiconductor technology provider for 22 nanometer (nm),
14nm and 10nm semiconductors for the next 10 years.
Globalfoundries was spun off from Advanced Micro Devices in 2009
to handle chip production.
IBM said handing
over the chip division will allow it to concentrate on fundamental
semiconductor research and the development of future cloud,
mobile, big data analytics, and secure transaction-optimized
is expected to close next year.
On Monday, IBM
reported that its adjusted earnings from continuing operations
were $3.68 per share, while revenue totaled $22.4 billion. The
performance missed the expectations of analysts polled by FactSet,
who predicted earnings of $4.32 per share on revenue of $23.39
International Business Machines Corp., based in Armonk, fell
$14.35 to $167.70 in premarket trading.