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IBM 'major announcement' suggests chip manufacturing deal

20 Oct 2014

IBM (International Business Machines Corp.) has released a statement saying it will make a “major business announcement” shortly. It's widely thought this will be about a finalised deal in regards to chip manufacturing.

IBM’s second quarter revenue was $24.4 billion. This was down two percent from the second quarter of 2013, which was $24.9 billion. Despite this, the company increased profit to $4.1 billion.

Revenue growth is said to continue to slow while IBM transitions to new technology and service offerings, and the company is looking for ways to increase margins. One way to do this is to shut down the parts of the business that aren’t so profitable, such as the IBM chip manufacturing operations in East Fishkill, New York.

Reports have come to light recently that IBM was working on a deal to have GlobalFoundries to take over the chip manufacturing plant, but it fell through due to the fact the two parties couldn’t reach an agreed price. According to a Bloomberg report, IBM offered $1 billion when GlobalFoundries wanted $2 billion.

IBM has been steadily selling its hardware assets – just this month it sold its x86 server business to Lenovo for $2.1 billion.

Instead of making Power servers in-house, IBM is now working with third-party companies, such as Power Architecture, to develop chips, servers and components.

If the GlobalFoundries deal goes through, it’s likely IBM will move manufacturing of Power chips to the Santa Clara, California, company.

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