The idea at first seems strange–why not just shut down a unit that’s bleeding money, save yourself a billion bucks? IBM agreed to pay Globalfoundries Inc $1.5 billion to “take an unprofitable chip-manufacturing unit off its hands” according to Bloomberg. IBM doesn’t want the losses on its balance sheet, but it still wants the chips. Globalfoundries will provide a certain type of power chip to IBM for a decade, while seeing if it can turn around the money-losing operation.
For its trouble Globalfoundries, which is owned by the Abu Dhabi government, will get thousands of patents and engineering talent. Globalfoundries hopes to grow the business to compete with chip industry leader Intel.