Intel signaling spinoff by moving memory unit
azcentral.com
Ian King
Bloomberg News
May. 9, 2006 12:00 AM
Republic reporter Max Jarman contributed to this article.
SAN FRANCISCO - "Intel Corp., the world's largest semiconductormaker, separated the production of memory chips from other processors, signaling the company may be preparing to jettison its memory unit.
Three chip plants and two test and assembly facilities have been split from the company's manufacturing group and assigned to their own group, Intel employees were told in an internal announcement last week.
The news doesn't affect Intel's two Chandler campuses, where about 10,900 people are employed. advertisement
"We don't manufacture memory products, and we don't have any of the support," said Jeanne Forbis, an Intel spokeswoman in Arizona.
Intel operates two chip-manufacturing plants in Chandler and has a third under construction. The $3 billion Fab 32 facility will employ about 1,000 people when completed at the end of next year.
"The idea is to drive to greater profitability, greater focus," said Chuck Mulloy, a spokesman for the Santa Clara, Calif.-based company.
The changes may be a precursor to a spinoff or sale of the money-losing memory business as part of Chief Executive Officer Paul Otellini's plan to slash $1 billion in costs, said Doug Freedman, an analyst at American Technology Research. The unit, a maker of semiconductors to store programs on cellphones and DVD players, may be worth about $2 billion after posting operating losses totaling $455 million in the past three years.
"They are separating it structurally so that they can then spin it out in an initial public offering or sale," said Freedman, who on Monday upgraded the stock to "buy" from "hold" and doesn't own Intel shares. "The market will view this positively."
Otellini on April 27 said non-performing business would be "dealt with."
Intel shares sank 22 percent last quarter, the biggest first-quarter decline since at least 1983. The stock rose 60 cents, or 3.1 percent, to $20.11 in Nasdaq Stock Market composite trading Monday.
Plants in Israel, Ireland and Santa Clara as well as factories in China and the Philippines will be assigned to the flash-memory business run by Brian Harrison.
Shedding the division would mark a setback to Intel's ambitions to broaden beyond personal computers. Flash-memory chips in the 1990s became one of the few areas where Intel led a market unrelated to PCs. Profit waned as rivals entered and Intel missed demand for a new type of chip.
Intel may follow the lead of its nearest rival in PC chips, Advanced Micro Devices Inc., and spin off the unit to shareholders. Advanced Micro last year spun off its memory venture with Fujitsu Ltd., forming Spansion Inc." |
