January 7, 2010
By

D.H. Kass

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IBM Corp. said that its Global Financing unit has signed a deal with Advanced Micro Devices Inc. to provide accounts receivable financing for sales made to Chinese businesses operating in an area designated by the government for economic development.

The AMD deal follows an exclusive licensing arrangement between IBM and the Chinese government that allows the vendor to provide commercial financing to businesses located in the Tianjin Binhai New Area, a technology center and hub of economic activity linking north and south China.

AMD works with 11 distributors in China, including Avnet Technology Ltd. and Arrow Asia. The chip maker lists four master distributors and seven industrial distributors in its lineup, according to its web site.

The initiative, administered by a new IBM operating company called IBM Factoring (China) Co. Ltd., is designed to stimulate and support local, innovative businesses, and is tied to China’s four trillion yuan--the equivalent of $586 billion--lending and infrastructure stimulus plan.

“One of the keys to economic recovery is the successful partnering of private and public sectors,” said Mario Bernardis, IGF general manager for worldwide commercial financing.

“This new partnership with IBM Global Financing and the Tianjin government will bring great benefits to businesses looking to speed up the conversion of their invoices to cash. We are grateful to the Tianjin Administrative Bureau of Industry and Commerce for granting IBM this factoring license, a first of its kind in China.”

Specifically, IBM Factoring will underwrite receivables from AMD’s sales in China. It will purchase receivables generated from AMD’s sales to its local distributors, paying AMD up front for inventory delivered to its distribution network while offering payment terms to the distributors.

“This customer-focused financing arrangement can facilitate the flow of AMD’s market-leading solutions throughout the China marketplace,” said Devinder Kumar, AMD senior vice president.

“Working with IBM Global Financing, our customers in the region can focus on leveraging our technology toward greater profitability and resilience, and let the payment cycle run smoothly in the background.”

An important deal for IBM

IBM officials said that the deal is significant because it further signals the importance of private companies working with public sector organizations to advance economic growth.

As examples of its lengthening reach, IBM said that in the last year IGF backed the vendor’s Smart Planet projects to the tune of some $5 billion in investments, underwrote the expansion of high-speed broadband access to rural areas and, most recently, extended financing to providers of technology to support the modernization of electronic record keeping in the healthcare industry.

In 2008, IGF accounted for about nine percent of IBM’s pre-tax income. It has been operating in China for more than 10 years.

TAGS: AMD, IBM, China, financing, distributors

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