Intel Considering Stake in Micron Tech, Report Says (
Santa Clara, California, Sept. 25 (Bloomberg) -- Intel Corp.
is negotiating to buy a minority stake in Micron Technology Inc.,
according to a report in the online version of Electronic Buyer's
News, citing anonymous sources.
Intel, the world's largest chipmaker, and Micron, the
largest U.S. maker of memory chips, both declined to comment on
the report. Shares of Micron surged 2 5/8, or 8.5 percent, to 33
5/8 in late trading. Intel gained 3 3/16 to 88 1/2.
Some analysts said an agreement may make sense for Intel if
the chipmaker believed that there was a chance that the supply of
dynamic random access memory chips wouldn't meet demand, as it
did in 1995, and that that would hamper growth in the PC market,
on which Intel relies so heavily.
''It would make sense if Intel thought the DRAM market would
be so constrained that it would choke off PC growth,'' said
analyst Tad LaFountain of Needham & Co., who has a ''sell''
rating on Micron.
EBN said sources close to the companies said the transaction
would likely be a cash infusion that would give Intel a steady
supply of memory chips at cheap prices and Micron more capital
for expansion plans.
There have been several rumors of Intel making investments
in cash-strapped memory chip makers, who have suffered as prices
for some of their products plummeted 70 percent in the past 12
months. Earlier this year there were rumors of an investment in
Samsung Corp. of South Korea.
Cash
Micron could use the cash to complete its Lehi, Utah plant,
which has been delayed since 1996. Also, the Boise, Idaho-based
company needs to spend as much as $1 billion to update plants
that will be acquired from Texas Instruments Inc. when the
purchase of TI's memory business is completed in the next few
weeks, analysts said.
Intel, which makes 85 percent of the processors in the
world's PCs, also makes lots of motherboards, which include the
processor as well as the surrounding chips, such as graphics and
memory, that make up the guts of a personal computer.
Some analysts said it was more likely that Intel would
strike a supply agreement with Micron to assure a specified
amount of product for Intel, possibly in exchange for warrants or
other securities.
A stake ''makes zero sense'' said analyst David Wu of ABN
Ambro Securities, who said a supply agreement is more likely.
Santa Clara, California-based Intel had $7.69 billion in
cash at the end of June.
Intel invented DRAM and started the entire market in the
1970s, but got out of it in the mid-'80s when Japanese
manufacturers were dumping the product, forcing nine of 11 U.S.
makers of memory out of the market. It was at that point that
Intel bet the company on microprocessors, which were not yet a
mass-market product.
'(A stake in Micron) would be kind of an ironic since Intel
got out of memory in the 1980s,'' said analyst Tom Rhinelander,
analyst at Forrester Research Inc. |
