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Deal for GloFo to buy IBM plants falters

Friday, July 18, 2014
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— Talks of a potential GlobalFoundries purchase of two IBM semiconductor plants have stalled and any deal may be off, according to reports.

The Alliance@IBM, which represents IBM workers, reported it had heard IBM managers in East Fishkill were told there would be no sale. The Poughkeepsie Journal also reported talks are stalled or dead.

The companies have refused to confirm or deny there have even been talks about GlobalFoundries buying IBM chip fabrication plants in East Fishkill and Essex Junction, Vermont.

“Lots of rumor and speculation out there, none of which we care to comment on,” said GlobalFoundries spokesman Travis Bullard.

GlobalFoundries has been busy building and starting production at its Fab 8 facility in the Luther Forest technology Campus, the only manufacturing site it now has in the United States. It has other plants in Dresden, Germany, and in Singapore.

What such a purchase would mean to GlobalFoundries’ plans for future development at its Saratoga County site is unclear; the company has approved plans for a second plant at Fab 8, and town officials have been told there could even be a third factory.

Reports in financial media have said IBM wants to sell its chip plants to focus on advanced computer data development and research.

Whether there are sale talks or not, IBM and GlobalFoundries already work together on several fronts. Both are part of the advanced research consortium at the College of Nanoscale Sciences and Engineering in Albany, and GlobalFoundries has a contract to make cutting-edge chips for IBM.

“GlobalFoundries and IBM are very close, and they’re both all tied up in the investment the state government is making in the Albany-Saratoga area,” said Dan Hutcheson, CEO of VLSI Research, a semiconductor analysis firm in San Jose, California.

In addition, the companies agreed this spring to have 200 IBM workers temporarily assigned to Malta, to help with the continued startup of production at Fab 8.

“Some of their best people are up there,” Hutcheson said.

About 2,400 full-time employees work at Fab 8, and GlobalFoundries continues to hire aggressively. A stir was caused last weekend when GlobalFoundries placed large recruitment ads in Burlington, Vermont, and Poughkeepsie papers, apparently seeking to recruit current and former IBM workers.

The Poughkeepsie Journal reported Thursday that IBM’s Hudson Valley workforce has dropped to its lowest level in decades. The paper said about 6,900 people now work for IBM in Dutchess County, down from a high of 31,000 people in the mid-1980s.

Len Jelinek, chief analyst at IHS Electronics & Media in Tempe, Arizona, said the IBM facilities would present challenges and opportunities, since they are specialized facilities.

“The acquisition of these facilities would provide GlobalFoundries additional capacity and revenue [only if a supply agreement was part of the sale] but they would not provide anything that could be viewed as essential for enhancing GlobalFoundries’ position as a technology leader within the foundry manufacturing space,” Jelinek said in an email Thursday.

Regardless of what happens, Hutcheson expects the two companies to remain close. “Global needs IBM for research and as a customer, and IBM needs Global for mass production of leading-edge technology,” he said.

IBM on Thursday announced second-quarter earnings of $4.12 per share, up 42 percent from a year earlier. Second-quarter net income was $4.1 billion, an increase of 28 percent. Total revenues were $24.4 billion, down 2 percent.

“In the second quarter, we made further progress on our transformation. We performed well in our strategic imperatives around cloud, big data and analytics, security and mobile,” said Ginni Rometty, IBM chairman, president and CEO.

 
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