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Thursday, July 17, 2014

In IBM Earnings Report, Few Clues About its Plans for Essex Junction

Posted By on Thu, Jul 17, 2014 at 7:55 PM

click to enlarge IBM's Essex Junction facility - FILE: MATT THORSEN
  • File: Matt Thorsen
  • IBM's Essex Junction facility
For weeks, business and government leaders in Vermont nervously awaited the release of IBM's second-quarter earnings report. They speculated that the company might clarify whether it plans to sell its chip-making division to GlobalFoundries or another suitor — a decision that would affect the more than 4,000 employees of IBM's Essex Junction plant.

But Thursday afternoon's earnings announcement came and went with few clues. 

In a conference call with industry analysts, chief financial officer Martin Schroeter said that Big Blue would continue to divest itself of businesses that fail to drive company profits. Revenues from its hardware division fell 11 percent for the quarter, while those from its microelectronics business fell 18 percent.

Asked about persistent reports that IBM is seeking to sell its chip-manufacturing business, which includes the Essex Junction facility, Schroeter dodged the question. Instead, he referred to IBM's announcement earlier this week that it will invest $3 billion over the next five years in next-generation semiconductor research and development.

"We've been very, very vocal about our goal to remain the leader, the absolute leader, in high-performance and high-end systems," he said. "We're the leader today and we would expect, with this kind of investment, we can continue to maintain that leadership."

But, Schroeter emphasized, that research "is clearly focused on the distant future" — not, he seemed to say, the quotidian manufacturing taking place in IBM's aging chip foundries.

Economic development officials said Thursday evening they remain in the dark about IBM's plans. 

"I haven't heard anything," said Secretary of Commerce Pat Moulton.

Greater Burlington Industrial Corporation president Frank Cioffi, who has been leading local efforts to keep the Essex plant open, said that all he has heard is speculation.

"We're hearing that nothing is coming down on Vermont right away, but that could be hot air, too, for all we know," he said. "So we sit and wait."

In recent days, newspapers in upstate New York, where IBM also operates facilities, have reported that the sale to GlobalFoundries was off, but those reports appeared to rely on anonymous and secondhand sources. Neither company has publicly addressed the rumors.

Speaking at an unrelated press conference Thursday afternoon in Burlington, Gov. Peter Shumlin said he could not directly comment on what he has or hasn't heard about a sale.

"What I can tell you is, I'm engaged," he said. "I'm committed to doing everything I can within my power to continue to have IBM or whoever they might partner with in the future to understand that we've got an extraordinary workforce, an extraordinary resource and we want to continue that relationship."

Despite his reticence to disclose what he knows, Shumlin appeared to cast doubt on the recent news stories. 

"You know, I read the reports in the press," he said. "I personally think sometimes we are making assumptions about things that we do not yet know, and I would caution us in that regard."

What kind of assumptions?

"Well, you know, you've read the press reports. I don't need to repeat them," he responded. "But, you know, you see some pretty doomsday stuff out there. And all I'm saying is I would not believe anything that I do not know, and so far I don't think many of us can say with confidence that we know exactly what we are talking about."
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About The Author

Paul Heintz

Paul Heintz

Bio:
Paul Heintz is a staff writer at Seven Days, and the author of the weekly political column, "Fair Game."

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