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GlobalFoundries is close to acquire IBM’s foundry business

International Business Machines Corp. and GlobalFoundries are finalizing details of a deal under which the latter will get semiconductor manufacturing business of the former. The transaction is expected to bring new customers to GlobalFoundries, whereas IBM will reduce its losses going forward.

IBM has been considering to sell its chip-making business for many years now, but has not done this due to a number of various reasons. Early this year Ginni Rometty, the chief executive officer of IBM, finally made the decision to get rid of the semiconductor manufacturing assets, which include a rather old 200mm fab in Burlington, Vermont, and an advanced 300mm facility in East Fishkill, New York, in addition to various patents and intellectual property. Earlier this year IBM reportedly held talks with Intel Corp., GlobalFoundries and Taiwan Semiconductor Manufacturing Co. over potential transaction. It was reported in early April that IBM decided to sell the foundry business unit to GlobalFoundries.

According to Bloomberg news-agency, the transaction between IBM and GlobalFoundries is about to be finalized. GlobalFoundries is primarily interested in acquiring IBM’s engineers and intellectual property rather than the manufacturing facilities since the company has a lot of its own top-notch capacity. The top contract maker of semiconductors will also act as a supplier for IBM’s microprocessors and will gain additional customers.

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Last year GlobalFoundries revenue was 15.135 billion UAE dirham (AED), which is $4.22337/£2.50949/€3.11895 billion. The company’s revenue growth compared to the previous year was not significant, yet, the company lost around 3.283 billion UAE dirham ($893.76, €660, £531 million) because of additional investments into manufacturing capacities. New customers that the company will land thanks to the acquisition of IBM’s foundry business should help GlobalFoundries to boost revenues and profits.

It is unknown what kind of intellectual property GlobalFoundries will get, if it proceeds with the acquisition. Several months ago IBM wanted to retain a lot of chip manufacturing-related IP. Terms of the actual transaction are unknown.

IBM and GlobalFoundries did not comment on the news-story.

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KitGuru Says: In general, everything seems to be right here. GlobalFoundries gets new customers and additional manufacturing capacities, IBM cuts-down its losses because it ceases to investment into semiconductor manufacturing. However, there are a lot of wrongs here as well… IBM has been leaving itself without any actual production for years now: the PC business unit was sold in 2004, the x86 server business unit was sold this year and the chip business unit will also be sold in 2014.

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