Private Globalfoundries is "the lead candidate" to acquire IBM's (IBM -0.4%) struggling chip manufacturing/foundry ops, sources tell the WSJ. Market leader TSMC (TSM -0.5%) is said to have dropped out of talks, and though Intel is said to be involved, Globalfoundries is showing more interest.
Sources add a deal isn't imminent, and that price remains an issue: IBM originally wanted $2B+ for the business, whose sales tumbled 33% Y/Y in Q4 (evidence of share loss) and is in the midst of seeing layoffs, but initial bids have only been north of $1B.
The business was first reported to be on the block in early February. Bernstein has estimated it had 2013 revenue of $1.75B, and an op. loss of $130M.
Though presenting integration challenges, acquiring IBM's chip unit would give Globalfoundries more scale as it battles against TSMC, which is estimated to have nearly 50% of the foundry market and claims a long list of blue-chip clients.
TSMC shares slipped yesterday after Globalfoundries announced a wafer supply deal with ex-parent AMD that includes GPU and console processor manufacturing (thus far handled by TSMC). Nonetheless, Digitimes has reported TSMC's capacity is booked through the end of Q3 thanks to strong mobile/PC chip demand.