IBM to Pay Globalfoundries $1.5 Billion to Take Chip Business
However, while IBM may be giving up the chip manufacturing business, it's not stepping away from semiconductors altogether. The company plans to continue its plans to spend $3 billion over the next five years on projects that will help shrink current processor architecture to as small as 7 nanometers and to investigate options for what will replace traditional silicon chip architecture when it reaches its physical limitations. Company officials announced the effort in July. Moorhead said IBM's decision to stick with the $3 billion plan made little sense for a company that is giving up with chip manufacturing business, and wondered whether Big Blue was looking to sell its chip research business. In a post on the company blog, Tom Rosamilia, senior vice president of IBM's Systems and Technology Group and Integrated Supply Chain, said the company will continue to invest in its Power servers—the company launched its Power8 systems in April—mainframes and storage systems even as the company looks to grow its cloud and big data efforts, and argued that semiconductor research is a key part of those strategies. "We are going to lead in creating highly differentiated servers and storage systems that can manage the latest big data, cloud, mobile and cognitive workloads," Rosamilia wrote.IBM's struggles can be seen in its financial numbers, with revenues in the third quarter falling 4 percent over the same period last year and net income declining 17 percent. "We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry," Ginni Rometty, IBM chairman, president and CEO, said in a statement. "While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas—cloud, data and analytics, security, social and mobile—where we continue to shift our business."
IBM is in a difficult position as it tries to pivot away from what made it such a major tech vendor in the past and adapt to a changing environment where the focus is on more open infrastructures. Moorhead said enterprise executives—after hearing about the open architectures top-tier Web companies like Facebook and Google are using and efforts like the Open Compute Project—are scrutinizing the type of packaged hardware, software and services deals that companies like IBM, Oracle and SAP are known for. Those companies are coming late to the cloud and are behind the likes of Hewlett-Packard and Dell in embracing the OpenStack cloud orchestration platform, and now they're trying hard to catch up, he said.