IBM announced a deal clearing chip maker GlobalFoundries to acquire the tech titan's microelectronics business, as the company continues its transition toward the enterprise market.
According to terms of the deal, IBM will pay GlobalFoundries $1.5 billion in cash over the next years, and will take a pre-tax charge of $4.7 billion for the third quarter.
Shares of IBM are down 7.5% in pre-market trading Monday.
IBM also moved up its third quarter earnings report, which shows total revenue of $22.4 billion and an earnings per share of $3.68, both far short of Wall Street forecasts, according to analyst estimates compiled by Bloomberg.
During a conference call Monday, IBM chief financial officer Martin Schroeter cites weaker-than-expected software revenue and struggles in the services businesses for the quarter.
"Obviously, we were disappointed in this quarter," said IBM CEO Virginia Rometty during a conference call.
The chip division deal gives GlobalFoundries -- a Silicon Valley based chip maker -- access to thousands of semiconductor patents as well as IBM operations in New York and Vermont. A joint statement from the companies says it will offer work opportunities to "substantially all IBM employees" at the facilities.
For IBM, the tech titan says it will continue to research semiconductors. "This acquisition enables IBM to focus on fundamental semiconductor and material science research, development capabilities and expertise in high-value systems," says IBM Senior Vice President & Director of Research Dr. John E. Kelly III in a statement.
This is the second division IBM has spun off this year. In January, IBM sold a portion of its server business to Chinese company Lenovo for $2.3 billion. Ten years ago, Lenovo scooped up IBM's PC business, marking the end of an era for Big Blue.
Rometty says IBM is focusing more heavily on new areas, including cloud, data and analytics, social, mobile and security. Last summer, IBM announced a partnership with Apple to create a variety of business apps that combine IBM data with the iPhone and iPad. Last week, IBM revealed a deal with SAP where it will provide cloud infrastructure for the software company's business apps.
"We've got to reinvent ourselves," Rometty says, "like the way we've done in prior generations."
FBR Capital Markets analyst Daniel Ives says IBM's strategy has turned to aggressively moving toward key growth areas, especially cloud computing, while dropping efforts in costlier ventures like the chip business.
"It's clear that their back is against the wall," Ives says. "They need to get the dead weight off the ship so they can have smoother sailing going forward."
Follow Brett Molina on Twitter: @brettmolina23.
