(UPDATE) Intel Now Rumored To Be In Talks To Buy Stake In Micron Technology
Dow Jones Online News, Friday, September 25, 1998 at 17:43
NEW YORK -(Dow Jones)- Investors bid up shares of Micron Technology
Inc. Friday, after a report in CMP Media Inc.'s Electronics Buyers' News
magazine suggested that Intel Corp. is in talks to acquire a small stake
in the semiconductor concern.
At Friday's close, Micron (MU) was up $2.75, or 8.9%, to $33.75 on
volume of over 6 million. Traders said the prospects of Intel (INTC)
investing in Micron would be a boost to the company that has suffered in
the past few years from pricing pressures on memory chips.
A Micron Technology spokeswoman declined to comment on the rumor.
Micron could use the money in order to upgrade the DRAM (dynamic
random-access memory) manufacturing facilities it is buying from Texas
Instruments Inc., said Josephthal & Co. analyst Larry Borgman.
Intel has been buying memory chips from Micron Technology for some
time, and buying the company would provide the microprocessor giant with
a steady supply, analysts said. Intel has made investments in companies
in the past in order to have a "strategic supply when times get tight,"
said Borgman.
Investing in Micron also could help an Intel partner, Rambus Inc.
(RMBS), some market sources said. Rambus has come up with a design
supported by Intel that is said to enhance memory-chip performance.
Micron isn't thrilled about the idea of paying Rambus a royalty every
time it sells a chip, according to market rumors. Some watchers have
speculated that Intel will invest in Micron as a way to ensure that all
the memory-chip makers embrace the Rambus technology.
Intel also has been linked lately to rumors of a possible acquisition
of computer-networking equipment maker 3Com Corp. Herb Greenberg, a
columnist for Internet-based news service TheStreet.com, recently said
Intel officials have been spending a lot of time at 3Com. But Sanford C.
Bernstein & Co. analyst Paul Sagawa said a deal isn't likely.
Other analysts have also said a combination with 3Com is unlikely and
have questioned whether the two would make a good fit. Intel's core
business is chips, though it also sells networking equipment. Both firms
are based in Santa Clara, Calif.
In addition to its dominant Pentium chips, Intel makes adapter cards
for computer networks, a core business for 3Com. In fact price-cutting
on the cards by Intel has at times hurt 3Com. The cards are installed in
computers to enable the machines to communicate over networks. A
combined Intel-3Com would have at least 70% of the market for such
cards, according to some estimates.
In addition to a host of networking-equipment businesses, 3Com last
year acquired modem maker U.S. Robotics Corp. and also makes the popular
PalmPilot line of hand-held computers.
What makes the recurring rumor interesting is the belief by some
analysts that Intel is trying to "siliconize" the networking market - or
make it more like the semiconductor market that it dominates. 3Com's
challenge has been to keep finding ways to differentiate its adapter
cards and other gear to keep them from becoming a commodity.
Market watchers say Intel wants to surround PCs in small businesses
and corporate workgroups with low-cost, high-power connections. In such
an environment, Intel and other chip makers would have an advantage
because the only way to increase capacity and still cut costs is to use
advanced silicon technology.
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