MONEY

IBM, GlobalFoundries said to head to arbitration on sale

Joseph Spector
IBM

ALBANY – IBM and GlobalFoundries are said to be headed to arbitration as early as next week in the latest effort to strike a deal for IBM to sell its semiconductor manufacturing operations.

A source involved in the discussions between the companies told Gannett's Albany Bureau on Thursday that the sides are optimistic that an arbitrator can iron out the details. An agreement has stalled in recent months, including failed negotiations in the past few days, the source said.

The move toward arbitration is the latest sign that the Armonk-based IBM and GlobalFoundries haven't given up on a deal. IBM wants to sell its assets in East Fishkill, Dutchess County, and Burlington, Vermont, to GlobalFoundries —which has a growing chip factory outside Albany.

The SemiWiki website reported Tuesday that IBM and GlobalFoundries have reached a "handshake" agreement on a $2 billion deal that could be announced next month.

An IBM spokesman declined comment. Travis Bullard, a spokesman for GlobalFoundries, said, "We do not comment on rumor and speculation."

News reports in recent months have said that IBM is looking to pay GlobalFoundries to take over its struggling chip plants, which are largely based in East Fishkill.

Already GlobalFoundries has been recruiting workers for its Saratoga County plant, and IBM in May dispatched about 150 to 200 technical employees to the Saratoga facility.

New York has a major stake in the future of the two companies and is looking to retain IBM jobs in any sale.

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

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.

So during a round of IBM layoffs earlier this year, New York was spared while IBM cut jobs across the country, according to the Times-Union in Albany.

Because New York owns the equipment and facilities that IBM uses for research and development in Albany, the state has unmatched leverage.

IBM, for example, announced in July it will invest $3 billion in computer chip development and research. Most of that money is expected to be spent in New York.

Also, as part of any sale to GlobalFoundries, state officials are pressing IBM to expand its job-retention commitment past 2016 and to expand it to nearly all of the roughly 14,000 IBM employees in the state. IBM has facilities in Endicott, Broome County, with about 700 workers, along with its offices in Westchester and Dutchess counties.

New York has also doled out tax breaks and incentives to both companies.

Between 2000 and 2013, IBM received $880 million in tax breaks in New York, a report earlier this year said. GlobalFoundries, meanwhile, received more than $1 billion in incentives from the state for its massive manufacturing plant in Malta, Saratoga County.

IBM's first manufacturing facility was in Endicott in the early 1900s.