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By | Simon Sharwood 6th August 2014 07:27

IBM can't give away its chip business: report

Dangled $1bn before GlobalFoundries, which asked for more

IBM's attempt to offload its chipmaking business to GlobalFoundries saw it dangle a billion dollars in front of the putative purchaser, but that offer was rejected as inadequate.

So says Bloomberg, quoting a “person familiar” with the failed deal.

IBM's chippery chaps make fine product, but not so fine or in sufficient volumes to turn a profit. Big Blue is believed to leak a billion or two dollars each year.

Red ink is obviously unacceptable, but IBM has also given itself an ambitious earnings-per-share target that makes getting out of under performing businesses a very fine idea.

Throw in IBM's long retreat from hardware, most recently marked by the sale of its x86 server business to Lenovo, and the chip business looks ripe for rejection.

GlobalFoundries was touted as a likely destination for IBM's unloved chip biz, but the deal fell through.

Bloomberg says that's because GlobalFoundries wanted $2bn in cash, a sum it deemed sufficient to stem losses while it turned things around.

IBM wasn't willing to dip that far into its pockets to make the deal happen, so everyone retreated to square one. GlobalFoundries carries on as usual. And IBM keeps trying to figure out what to do with an asset it doesn't want, but can't give away. ®

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