ARMONK, N.Y. IBM Corp. on Thursday (April 15) disclosed a $150-million loss within its former technology unit, mostly due to ongoing chip yield issues and a drop in intellectual property revenues.
The former technology unit includes IBM's Microelectronic Division, which provides ASIC products, ICs and foundry services. Recently, IBM combined its separate technology and systems business units into one operation.
The Microelectronics Division has been in the red for some time. During a conference call with analysts, John Joyce, senior vice president and chief financial officer for IBM, said the former technology unit lost $150 million on a pro- forma basis in the first quarter of 2004 alone.
One problem is ongoing yield issues within the company's 300-mm fab in East Fishkill, N.Y. For months, IBM has been struggling with yields in the fab, a 130- and 90-nm plant.
"We do see demand, but we need to make the products," Joyce said. "We need to improve our yields in our 300-mm plant. Our yields did see some improvement, but not as fast" as the company had hoped.
IBM is seeing better-than-expected yields at its 200-mm plant in Burlington, Vt., he said. But profits at the 200-mm fab did not offset ongoing losses within the 300-mm fab, or a sudden drop in IP revenues in the first quarter, he said.
Joyce said the technology unit will become profitable in 2004, due to increased chip demand, improving yields and flat IP sales. This week, Applied Micro Circuits Corp. announced plans to acquire intellectual property and the assets associated with IBM's 400 series of embedded PowerPC standard products for about $227 million in cash.
Overall, IBM announced first-quarter 2004 diluted earnings per common share of $.93 from continuing operations compared with diluted earnings of $.79 per share in the same period of 2003, an increase of 18 percent.
First-quarter income from continuing operations was $1.6 billion compared with $1.4 billion a year ago, an increase of 16 percent. Revenues from continuing operations for the first quarter were $22.2 billion, up 11 percent compared with the first quarter of 2003 revenues of $20.1 billion.