Poughkeepsie Journal

IBM is paying $1.5 billion to GlobalFoundries in order to shed its costly chip division, which maintains a pivotal presence in Dutchess County.

A key part of the deal, officially announced just before 7 a.m. today, is that "substantially all IBM employees at the two facilities who are part of the transferred businesses" will keep their jobs, but with GlobalFoundries as employer.

GlobalFoundries will get IBM's global commercial semiconductor technology business, including intellectual property and technologies related to IBM Microelectronics. It also gets IBM's existing semiconductor manufacturing operations and plants in Wiccopee, East Fishkill, N.Y. and Essex Junction, Vt., near Burlington, as well as its commercial microelectronics business.

Big Blue has its major chip fabricating plant in East Fishkill. At last report, IBM had nearly 7,000 employees in Dutchess, split between East Fishkill and the Poughkeepsie plant, which makes large computers. GlobalFoundries is a semiconductor partner with a plant in upstate Saratoga County.

This historic deal changes the face of computing in Dutchess County, along with the manner in which IBM's local presence has played such a critical role in the global company's success. Additionally, such a seismic shift at IBM strikes at the heart of Dutchess County, home to many current and former IBM employees, on economic, social, political and technological levels.

The sale of a key division that produces fundamental technology is a major move for IBM, which created the division decades ago to provide chips to run its lines of computers. The company plans to keep its basic research capabilities in-house, but beyond that, the entire chip division appears to be headed to GlobalFoundries.

The companies have been partners since 2009.

"GlobalFoundries plans to provide employment opportunities for substantially all IBM employees at the two facilities who are part of the transferred businesses, except for a team of semiconductor server group employees who will remain with IBM," according to a press release issued this morning by IBM. "After the close of this transaction, GlobalFoundries will be the largest semiconductor technology manufacturing employer in the Northeast."

Under the agreement, GlobalFoundries will become IBM's exclusive server processor semiconductor technology provider for 22 nanometer (nm), 14nm and 10nm semiconductors for the next 10 years.

IBM relies on its chip division to provide the microprocessors that are the hearts of its high-end computer systems. IBM makes mainframes and high-end Power systems at its Poughkeepsie plant.

IBM will make payments to the chipmaker over three years, but it will take a $4.7 billion charge in the third quarter when it reports results Monday. Shares of International Business Machines Corp., based in Armonk, rose slightly in premarket trading.

The announcement this morning by IBM of the historic sale of its chip manufacturing business brings a sense of clarity to employees, but leaves many questions remaining.

The Poughkeepsie Journal's state Capitol bureau has learned that IBM jobs in East Fishkill will become GlobalFoundries jobs and all manufacturing jobs there will be retained in a multi-year deal between the state and the companies. Several thousand work at that facility.

GlobalFoundries, however, is being paid to take on the operation. IBM will pay Global $1.5 billion to take over the money-losing manufacturing business.

In a highly unusual switch of timing, an announcement of its third-quarter earnings also will be released this morning, Monday.

All prior job commitments between New York and IBM will be preserved in the sale, a state source with knowledge of the deal told Gannett's Albany Bureau on Sunday.

In February, IBM and Gov. Andrew Cuomo reached a deal to maintain 3,100 high-tech jobs in the Hudson Valley and surrounding areas through 2016. The deal was part of IBM's expansion in Buffalo to create 500 jobs at a $55 million high-tech hub.

New York has extraordinary leverage with IBM and GlobalFoundries, and the state has been looking to retain IBM jobs in any sale.

IBM is a top investor in a $4.4 billion deal in 2011 to expand research and development in New York, mainly at the SUNY College for Nanoscale and Science Engineering in Albany. New York owns the equipment and facilities in Albany, giving the state sway with the companies.

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