Alongside IBM’s disappointing results, and shares falling to 8%, the company are selling off their semiconductor business.
In efforts to increase gross profit margins, (down 90 basis points to 49.2%) in line with costs, a strategic decision has been made to sell off the IBM’s Microelectronics OEM semiconductor business and manufacturing operations to GLOBALFOUNDRIES.
The Q3 results did not include the semiconductor business which IBM classified as held for sale from September 30, 2014. IBM reports that, “In addition, discontinued operations includes operational net losses from the Microelectronics business of $0.1 billion in both the third quarter of 2014 and the third quarter of 2013.”
The whole semiconductor processing plant and facility needs an upgrade to keep pace with the market as the next generation of new smaller semiconductors are usurping the current models of parts.
GLOBALFOUNDRIES, owned by an Abu Dhabi sovereign wealth fund, has reached an agreement to close in 2015. They will receive $1.5 billion and disavow IBM from the necessary capital spend on upgrades. IBM released details as follows, “The cash consideration is expected to be paid to GLOBALFOUNDRIES over the next three years and will be adjusted by the amount of the working capital due by GLOBALFOUNDRIES to IBM, estimated to be $0.2 billion.”
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