IBM Drops Chip Division for $1.5 billion
IBM shares were down close to 8% in pre-market trading Monday after the company reported a massive earnings miss exacerbated by steep losses from discontinued operations and news it will pay $1.5 billion to get ride of its chip division. If the slide holds through the opening bell shares of the computing giant will clock in below $168, a fresh 52-week low.The company reported $22.4 billion in third quarter revenue from continuing operations, close to $1 billion short of Wall Street analysts’ consensus estimate and down 2% from third quarter 2013. Operating net income from continuing operations came in at $3.7 billion, down 18% from a year ago and also sharply below Street expectations. Operating earnings per share from continuing operations were $3.68, down 40 cents from a year ago and 63 cents behind the Street.
The picture gets even uglier when losses from discontinued operations are factored in.
IBM has agreed to essentially give its Microelectronics OEM semiconductor business and manufacturing operations to Globalfoundries. On top of a $100 million operational net loss suffered from the Microelectronics business in the third quarter, IBM’s loss from discontinued operations included a non-recurring pre-tax charge of $4.7 billion, or $3.3 billion, net of tax based on fair value minus costs to sell the business assets. Costs include $1.5 billion in cash to Globalfoundries to take the chip division off IBM’s hands. The deal is expected to close in 2015.
Original article at www.forbes.com
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