IBM Planning to Sell Off Semiconductor Manufacturing: Rumor

IBM reportedly wants to chuck even more of its hardware business: a new report in The Wall Street Journal suggests that Big Blue is “exploring” the sale of its semiconductor-manufacturing operations.

IBM builds chips for clients, as well as its own server hardware. An unnamed person “familiar with the matter” told the Journal that IBM plans to sell off its manufacturing base while keeping the ability to design chips.

If this rumor pans out, it’ll be clear that IBM intends to rid itself of the majority—if not the entirety—of its hardware business. In January, IBM sold its lower-end server business to Lenovo for $2.3 billion; under the terms of that agreement, Lenovo will acquire IBM’s System x, BladeCenter, and Flex System blade servers and switches (among other hardware), while IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

The two companies go way back: In 2005, Lenovo acquired IBM’s PC-manufacturing arm, including the latter’s popular line of ThinkPad laptops, for $1.75 billion.

Also in late January, IBM announced that it would invest $1.2 billion to expand its cloud capacity, adding 30 new datacenters around the world over the next two years (the company already has 25 datacenters in its SmartCloud network, including 12 facilities it inherited as part of its SoftLayer acquisition in 2012). That’s in addition to IBM pouring money into its new Watson supercomputing initiative, which it plans on selling to various industries as an analytics solution.

For the past few years, IBM has wrestled with its customers abandoning expensive on-premises systems in favor of cloud services, if not cheaper hardware slapped together from commodity parts. At first it attempted to counter this migration by marketing its hardware as uniquely suited to run its software; but as that strategy failed to gain much traction—weakening hardware sales contributed to IBM’s underwhelming fourth-quarter numbers—the company has begun a mighty shift toward emphasizing its cloud-based services. Will Big Blue end up selling off all its hardware interests?


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