Could IBM Be Selling its Chip Manufacturing Business?

By Ed Silverstein February 07, 2014

Shortly after IBM announced it will sell its low-end server business to Lenovo – and may sell its software-defined networking (SDN) business to anyone – there are new reports that Big Blue may sell its semiconductor manufacturing business, as well.

News about the latest possible sale of a key IBM business was reported by The Wall Street Journal, citing unnamed sources.

Under the current plan, IBM would keep its chip-design capability, The Journal said.

Why would IBM want to sell the business? The company has a new focus and these other operations – which are sold or could be sold – go beyond the company’s new concentrations. In addition, chip manufacturing is “capital-intensive and volatile,” The Journal said.

“Shedding those operations could help boost IBM's profitability, and dovetail with recent moves by the company to reduce its reliance on selling computer hardware,” the newspaper adds.

Recently, IBM has moved away from servers – and is producing fewer chips for other companies. The Journal reports how videogame consoles offered by Sony and Microsoft are no longer using IBM chips, opting instead for those from Advanced Micro Devices.

Last month, it was reported IBM may ask $1 billion for its SDN business. Among the possible purchasers are Cisco, Dell, Fujitsu, Hewlett-Packard and Juniper along with other companies named as possible buyers, too, SDN Zone reported. Of those named, some media speculation has been focused on Cisco as the best to acquire the SDN business from IBM. IDC predicted the SDN market will reach $3.7 billion in 2016, compared to $360 million last year.

Earlier, IBM sold its x86 server business to Lenovo for $2.3 billion – which included other networking products, servers and switches.

Yet IBM continues to concentrate on the Watson computing business – which used in big data analytics – and then last year acquired SoftLayer cloud computing – another possible focus for the company.

Edited by Cassandra Tucker

TechZone360 Contributor

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