In January this year, IBM confirmed its plans to sell off its x86 server business to Lenovo, and now the company is said to be considering selling its semiconductor manufacturing operations as well.
IBM's semiconductor business is supposed to be technology intensive and also contributes technologies for some important initiatives including the Watson cognitive computing system and high-end servers.
A Wall Street Journal report cites a person familiar with the matter and says that IBM may sell its semiconductor manufacturing operations, but plans to retain its chip-design capabilities.
IBM entered into a deal with Lenovo in January this year and sold its x86 server hardware business and related maintenance services business for $2.3 billion. Reports suggest that IBM also approached other vendors to find if they were interested in buying the company's software defined networking business.
Toni Sacconaghi, an analyst at Sanford C. Bernstein, recently said that IBM has less of an economic rationale for its own chip manufacturing plants as it focuses less on servers. The company makes fewer chips for external customers, which may be a reason why it wants to sell off the semiconductor business.
Previously, IBM manufactured chips were used in Sony and Microsoft gaming consoles, but both the companies are now acquiring chips from Advanced Micro Devices Inc. However, IBM still makes chips for the Nintendo Wii gaming console.
IBM's microelectronics unit fell by around 3 percent in the nine months ending September 30, 2013. Bernstein says that the unit generated around $1.75 billion in revenue in 2013, but lost $130 million in pre-tax income. He estimates that the unit will shrink to $1.45 billion in revenue this year and lose another $130 million in pre-tax income.
In 2000, IBM confirmed that it will invest $2.5 billion to build a computer chip fabrication plant in East Fishkill, New York. At that time, it was supposed to be the largest capital investment in the company's history. The move was a part of a $5 billion total capital investment project, which was expected to support the chip maker's semiconductor business around the world.
The chip maker is believed to have appointed investment bank Goldman Sachs to find potential buyers for its semiconductor business.
IBM's shares increased by $1.38, or 0.8 percent, and closed at $174.67 on Thursday, Feb 6. On Friday, IBM's shares were up 1.47 percent at $177.24 on the NYSR during afternoon trading session.
