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Chips & Processors

Is IBM Really Selling its Semiconductor Business?

Is IBM Really Selling its Semiconductor Business?
February 7, 2014 10:13AM

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One rumor suggests IBM would would sell the microelectronics division or sell the assets but maintain its chip design teams. That is a sensible scenario. The assets would have to be sold to a company that IBM felt comfortable doing business with because some firm is going to have to crank out those Power processors and mainframe engines.

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IBM is selling off more and more of its business. After selling its x86 server line to Lenovo, Big Blue is reportedly shopping its semiconductor business.

News reports suggest IBM has hired Goldman Sachs to search for potential suitors. The Financial Times noted the sale would be Big Blue’s most significant strategic move since it faced a financial crisis in the early 1990s. IBM could not immediately be reached for comment.

“It is a step away from their heritage,” Patrick Moorhead, an analyst at Moor Insights and Strategy, told the Financial Times. “This is probably their biggest strategic realignment for 20 years.”

A Fundamental Change

We caught up with Charles King, a principal analyst at Pund-IT, to get his take on the rumor. He told us selling the semiconductor business would be a fundamental change for IBM. He doesn’t think selling would mean IBM would stop building Power Systems or mainframe systems any time soon, but Big Blue is already a different company in 2014 than it was in 2013.

“One rumor suggests IBM would would sell the microelectronics division or sell the assets but maintain their chip design teams. That actually is a sensible scenario. If the assets were sold they would have to be sold to a company that IBM felt very comfortable doing business with because somebody is going to have to crank out those hundreds of thousands of Power processors and mainframe engines for them if they are not doing it themselves,” King said.

“The rumor makes sense in certain ways but it’s not like selling of an x86 server business. There’s a lot more at stake, frankly, both from the standpoint of the technologies involved and also from the standpoint of the importance of those technologies in IBM’s nearer and long-term future," he added.

Reviewing the Last Deal

In late January, IBM agreed to sell its x86 server business to Lenovo for $2.3 billion. This includes System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

IBM is clearly jockeying toward the future. The Lenovo agreement follows recent announcements by IBM that it will invest more than $1 billion in the new IBM Watson Group, and $1.2 billion to expand its global cloud computing footprint to 40 data centers worldwide in 15 countries across five continents.

“This divestiture allows IBM to focus on system and software innovations that bring new kinds of value to strategic areas of our business, such as cognitive computing, Big Data and cloud,” said Steve Mills, senior vice president and Group Executive, IBM Software and Systems of the x86 business line sale. “IBM has a proven record of innovation and transformation, which has enabled us to create solutions that are highly valued by our clients.”

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