IBM said it would hive off its loss-making semiconductor unit to contract-chipmaker Globalfoundries Inc to focus on cloud computing, mobile and big data analytics.
IBM will pay Globalfoundries $1.5 billion in cash over the next three years to take the chip operations off its hands, the companies said in a statement on Monday.
IBM will take a related pre-tax charge of $4.7 billion in its third quarter.
Silicon Valley-based Globalfoundries said it would take over IBM's manufacturing operations in East Fishkill, New York and Essex Junction, Vermont, and offer jobs to substantially all IBM employees affected by the deal.
A team of semiconductor server group employees will remain with IBM.
Global Foundries is owned by the Mubadala Development, the Abu Dhabi government's investment fund.
IBM is scheduled to report its third-quarter earnings later on Monday.
Shares of IBM rose in premarket trading following the announcement. (Get the latest quote here.)