IBM Looking to Sell Chip Manufacturing Unit: Reports

The move would follow IBM's plans to sell its x86 server unit to Lenovo and focus more on such areas as cloud computing and analytics.

IBM, which already has a deal in place to sell its low-end x86 server business to Lenovo, now reportedly will shop around its chip manufacturing unit.

Citing unnamed sources, The Wall Street Journal reported that while IBM is looking for someone to buy the semiconductor manufacturing business, the company will keep its chip design capabilities. The Financial Times reported that IBM will work with Goldman Sachs to help court potential buyers.

At the same time, IBM is open to creating a joint venture with another company, the Financial Times said.

The move is another indication of the desire of IBM executives to lessen the company's hardware manufacturing business while they focus more of their efforts and money in areas such as cloud computing, enterprise software and analytics, including big data and its Watson initiatives.

IBM officials announced Jan. 23 that the company will sell its x86 server business—not only the System x servers, but also associated software, blade networking and maintenance operations—to Lenovo for $2.3 billion. At the same time, IBM will continue developing x86- and Linux-based software offerings for the systems, while also maintaining its Power and System z mainframe server units, storage offerings, and PureApplication and PureData appliances.

There also were reports soon after the Lenovo deal that IBM officials were considering selling the company's software-defined networking (SDN) business.

IBM's semiconductor manufacturing business includes facilities that build chips not only for Big Blue's own Power and mainframe servers, but also for third-party customers. In October 2013, IBM announced it was licensing a range of 32-bit ARM Cortex processor designs to build custom chips for clients for wired and wireless networking systems.

Chip manufacturing is an expensive business to be in, where new fabrication facilities can cost billions of dollars to build.

Among the outside customers were Microsoft and Sony, which used IBM's chip technology in their respective Xbox and PlayStation gaming consoles. However, in the latest generation of those systems, both Microsoft and Sony opted for chips from Advanced Micro Devices, which could prove to be a boon for AMD's embedded chip business.

It's been a difficult time in recent years for IBM's hardware business, with the Systems and Technology Group (STG) continuing to see falling revenues and becoming a larger drag on the vendor's overall financial numbers. In fourth-quarter 2013 figures unveiled by IBM last month, STG revenue fell 26 percent, while sales in its Microelectronics OEM unit fell 33 percent.

IBM has not been shy in recent years in shedding hardware businesses that executives feel have become commoditized or that no longer hold strategic value. The company in 2005 sold its PC business to Lenovo, and after that has gotten rid of other units, including printers.

As it looks to sell off its x86 server and—possibly—its chip manufacturing business, IBM continues to invest heavily in other areas, such as Watson and its Smarter Planet push. Officials recently announced that IBM will spend more than $1 billion on a new business group created around its Watson technology, and $1.2 billion to grow its cloud computing capabilities in 40 data centers around the world.