Rometty: Chip sale moves IBM to higher ground

Big Blue reaches deal for unwanted semiconductor business as it unveils lukewarm Q3 results

IBM is paying $1.5bn (£0.9bn) to offload its chip business as part of its strategy to focus on higher-value products and services.

Big Blue announced this morning it has reached a deal for its Microelectronics OEM semiconductor business unit with GLOBALFOUNDRIES as it unveiled a disappointing set of Q3 numbers.

Net profit from continuing operations for the three months ending 30 September fell 17 per cent to $3.5bn year on year, while revenue from continuing operations slowed by four per cent to $22.4bn.

These numbers do not include the discontinued chip business, for which IBM recorded non-recurring charges of $3.3bn, net of tax, during the quarter. This includes the cash consideration of $1.5bn it expects to pay GLOBALFOUNDRIES over the next three years under their agreement.

Factoring in these charges, IBM posted a net profit of just $18m in its consolidated results.

IBM chief executive Ginni Rometty (pictured) said she was disappointed in IBM's Q3 numbers but said her firm continues to perform well in its strategic growth areas of cloud, data and analytics, security, social and mobile.

Under their agreement, GLOBALFOUNDRIES will become IBM's exclusive server processor semiconductor technology provider for 22nm, 14nm and 10nm semiconductors for the next 10 years.

According to reports GLOBALFOUNDRIES and IBM were in dialogue earlier in the summer until talks broke down over price.

The deal follows IBM's sale of its x86 server business to Lenovo and signals the vendor's intent to focus on high-value products and services, Rometty said.

"We are executing on a clear strategy that is moving IBM to higher value, and we've taken significant actions to exit non-strategic elements of the business," she said. "This includes the announcement that we will divest semiconductor manufacturing to focus on research and development that will differentiate our systems."