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Updated at 12:58 p.m.
Fifty-six years after International Business Machines came to Vermont, the multinational technology behemoth is on its way out the door.
IBM announced Monday morning that it plans to transfer its semiconductor business to GlobalFoundries, a California company wholly owned by the Emirate of Abu Dhabi. Included in the deal are IBM's Essex, Vt., and East Fishkill, N.Y., research and manufacturing facilities, which GlobalFoundries quickly pledged to keep open 'for the foreseeable future.'
'While it's almost impossible for any business to make open-ended commitments, we can say that we have no plans to reduce the workforce at this time,' said GlobalFoundries spokesman Travis Bullard. 'This is a growth announcement for GlobalFoundries as we intend to extend job offers to nearly all of the employees in the acquired businesses, adding more than what is currently 5,000 jobs to our payroll.'
The deal, which must be approved by federal regulators, will provide GlobalFoundries with 'thousands' of IBM patents and 'world-class technologists,' the companies said in a joint statement, and will provide Big Blue with an exclusive source of server-processor chips for the next 10 years.
The terms of the agreement, nearly a year in the making, reflect how badly IBM wanted to rid itself of its chip division, which lost $700 million last year. The company will pay GlobalFoundries $1.5 billion, minus $200 million in working capital, to take the unit off its hands. In a conference call announcing disappointing third-quarter earnings Monday morning, IBM chief financial officer Martin Schroeder called the deal an important step away from its legacy hardware businesses - and toward a data-focused future in cloud computing.
'We just took a bold step in our transformation, going 'fab-less' with the divestiture of our semiconductor manufacturing business,' Schroeder said, referring to chip fabrication facilities. 'We have world-class technologists and intellectual property, but this is a capital-intensive business which has been challenging for us without scale.'
Employees at IBM's Essex plant have been on edge since the financial press reported early this year that the company was looking to ditch its chip division. But in the statement announcing the transfer, the companies said that 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 IBM spokesman Jeffrey Cross, 'Employees do not need to reapply for jobs; they just transition over, with pay and benefits that will be comparable to what they receive today.'
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At a press conference Monday morning at the Lake Champlain Regional Chamber of Commerce's Burlington headquarters, Gov. Peter Shumlin and an array of political leaders hailed the announcement as a victory for the state.
'This is good news for Vermont,' Shumlin said. 'It's good news for Vermont because GlobalFoundries is in the chip-manufacturing and development business. That's what they do.'
Since it bought Advanced Micro Devices' manufacturing arm in 2009, GlobalFoundries has become the world's second-largest chip producer. It operates seven fabs in Singapore and Germany and has been building a $10 billion facility in Malta, N.Y.
Shumlin said he has already discussed the deal with both GlobalFoundries chief executive officer Sanjay Jha and IBM vice president John Kelly. He plans to meet with them in person later Monday as they visit the Essex plant to discuss the news with employees.
The GlobalFoundries CEO, Shumlin said, 'has indicated to me that they intend not only to keep the hardworking, dedicated, innovative employees - over 4,000 that are currently working [in Vermont] - but that their hope going forward is to continue to expand and find ways to continue to compete in this business.'
During his remarks, Shumlin pulled a smartphone from his jacket pocket and held it up for a crowd of business leaders, politicians and journalists crammed into the chamber's conference room.
'Let's remember that the demand for these chips that we make in Essex Junction is robust - that you can't possible buy a decent gadget like this without having at least one, and sometimes eight or nine chips, made right here in Vermont,' he said. 'I'm optimistic about our future and excited about this development,' he said.
This post will be updated.
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