IBM aims to look for chip business joint venture as sale plans fail- sources

February 8
10:12 AM 2014

Two sources told Bloomberg that International Business Machines Corp or IBM is now turning its sights on seeking a joint venture partner for its chip manufacturing operations as the business failed to get an acquirer. They spoke on the condition of anonymity as the discussions are confidential.

One person with knowledge of the matter said a partnership would enable IBM to retain control of the chips' design and intellectual property. A limited development agreement is already in place between IBM and Globalfoundries Inc that helps IBM manufacture chips in New York state, the report said.

In the midst of seven quarters in a row of falling revenue, IBM has been selling its less profitable operations in order to bolster earnings. It agreed to divest its low-end server business last month to Lenovo Group Ltd in a $2.3 billion deal. In 2005, the Armonk, New York-based also sold its personal computer unit to Lenovo, the report said.

Another person knowledgeable about the matter told Bloomberg that IBM had engaged the services of Goldman Sachs Group Inc to evaluate possibilities for its chip business. One of the people said the firm has not been successful in getting a buyer for the business for at least a year but IBM Spokesman James Sciales did not comment on the information, the report said.

Personal computers, game machines and other equipment still use IBM's semiconductors like the PowerPC lineup. However, the company does not really have much of a role in the industry dominated by Intel Corp. Manufacturing microelectronics only comprises less than 2% of the revenue of IBM, the report said.

In addition, IBM is also dealing with the transition to cloud computing happening in the industry. As information gets stored online, there is less need for corporate customers to purchase their own server hardware. This has also lowered IBM's revenue in this market, the report said. 

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