Terms were not disclosed.
IBM said the move is part of the reorganization of its microelectronics business that itlast month. As part of that restructuring, IBM said it would close some chipmaking capacity and reduce its work force by 1,000 people.
The sale closed in June, and the move will be incorporated into the $2 billion to $2.5 billion charge IBM said it plans to take for microelectronics and the sale of its hard-disk drive business, IBM spokesman Michael Loughran said.
The move comes at a time when IBM is under pressure to cut costs in light of weaker demand for technology from corporations and as its stock is trading at the lowest levels the company has seen in four years.
New York Gov. George Pataki announced the plan Friday and said local investors will put $100 million into the new company, called Endicott Interconnect Technologies.
Endicott Interconnect will take on IBM's 2,000 interconnect division employees in Endicott, N.Y., and acquire its 4.1 million square feet facility, where IBM makes packaging products for chips and the printed circuit boards used in computers.
An IBM representative declined to comment on the sale price of the division and the facility.
IBM's Endicott facility has been the subject of sale speculation for years, according to Rick White, 52, a 28-year IBM employee who lives in Endicott.
"I'm still somewhat in a shock mode I guess, although this is something that had been rumored to occur at some point in the future for two or three years," White said.
White said the new company told employees it would be a couple of weeks before they would find out about the timing and details of the transfer to the new company, such as how the move will affect pensions, medical benefits and salaries.
"I'm very apprehensive and skeptical," White said.
IBM will lease for 10 years about 1.4 million square feet from the new company to use for other nonmanufacturing operations such as global services.
IBM had 19,000 employees in its microelectronics division before announcing the sale of the business, Loughran said.
Endicott Interconnect Technologies is backed by David and Bill Maines of Maines Paper and Food Service and Jim Matthews of the MATCO Electronics Group, Pataki said. Bill Maines will be president of the company.
The company will be able to apply for several different subsidies and grants from state agencies.
IBM shares were off sharply on Monday, falling $4.40, or 6 percent, or to $67.60, their lowest level since October 1998. Big Blue's shares have lost 44 percent so far this year.
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