IBM to explore a sale of its semiconductor business

International Business Machines Corp. (IBM) said it is considering a sale of its semiconductor business. Such a deal is reckoned by analysts as the most important strategic move of the company since the financial crisis it dealt with in the early 1990s.

People with knowledge of the matter reported that Goldman Sachs has been appointed by International Business Machines to point out possible buyers for the semiconductor business. According to the same people, the U.S.-based company is not absolutely certain about the idea of selling the unit. This means IBM could also try to find a suitable partner in order to create a joint venture for the semiconductor operations. The company also did not disclose any value of the business.

One of the analysts working at Moor Insights and Strategy – Mr. Patric Moorhead said for the Financial Times: “It is a step away from their heritage. This is probably their biggest strategic realignment for 20 years.” He also explained that the most likely buyers of IBMs business would be Global Foundries and Taiwan Semiconductor Manufacturing Co. Ltd (TSMC), which are semiconductor manufacturing groups.

The rumours of the sale in question have appeared just two weeks after the company announced it is selling its low-end server business to Lenovo in a deal estimated to 2.3 billion dollars. Such a deal, and respectively, a sale of the chip unit undoubtedly means grand changes for International Business Machines, because it would involve an exit from one of the most technology-accelerated parts of the companys business.

Some analysts shared they have been pretty surprised by the prospect of such a deal. They also said that International Business Machines has had an edge in developing some of its most advanced computing applications, such as the Watson question-and-answer system, due to the fact the company had the most powerful chips. Rick Doherty, an analyst working for Evisioneering said for the Financial Times: “I’d be shocked – there would be no Watson without [IBM’s] Power chips. Take away the Silicon part, and IBM may not be the tech giant it is 10 years from now.”

International Business Machines Corp. rose by 0.25% to $174.67 per share on Thursday, marking a -13.11% one-year change. According to CNN Money, the 22 analysts offering 12-month price forecasts for International Business Machines Corp. have a median target of $190.00, with a high estimate of $235.00 and a low estimate of $160.00. The median estimate represents a +8.78% increase from the last close.