MDG Potentials Stock News
REUTERS UPDATE 2-Micron to buy Lexar to broaden product line [FWSKQRF]
(Recasts, adds details, previous dateline NEW YORK)
By Scott Hillis
SAN FRANCISCO, March 8 (Reuters) - Micron Technology Inc.
<MU.N> on Wednesday said it will buy Lexar Media Inc. <LEXR.O>
for about $680 million, its latest push into consumer products
to balance out its main computer memory business.
Lexar's memory cards for devices like mobile telephones and
digital cameras will boost Micron's position in the market for
NAND flash memory, which is widely used in portable electronics
since it retains data with the power off.
"It's very difficult to penetrate the retail side of the
business and Lexar has very strong relations with retailers all
over the world," said Nam Hyung Kim, an analyst with
semiconductor consultancy iSuppli Corp.
"Now Micron can strengthen its retail business with the
hottest products," Kim said.
Its previous push into consumer products took place in
November, when Micron and Intel Corp. <INTC.O> announced the
creation of a $1.2 billion joint venture to make flash chips,
and immediately signed Apple Computer Inc. <AAPL.O>, maker of
the popular iPod digital music player, as a customer.
Lexar's main competitor is SanDisk Corp. <SNDK.O>, whose
shares fell 5.6 percent to $53.33. Micron's chief rivals are
Samsung, the world's largest flash maker, and No. 2 Hynix
Semiconductor Inc. <000660.KS>.
"We believe that this transaction will be perceived
negatively for SanDisk as Lexar is likely to be viewed as a
more credible competitive threat post the Micron acquisition,"
Goldman Sachs analyst James Covello said in a note.
Based on Tuesday's closing price of Micron shares, the deal
valued each Lexar share at $8.43, a premium of nearly 20
percent. But Micron shares were down 1 percent in Wednesday
trading, bringing the value down to $680 million.
Lexar shares jumped 22 percent to $8.65, a sign that
investors believe another and higher offer may emerge.
Boise, Idaho-based Micron has tried to reduce its reliance
on the volatile market for computer memory, known as dynamic
random access memory, or DRAM.
Lexar licenses its technology to companies that include
SanDisk Corp. <SNDK.O>, Samsung <005930.KS> and Sony Corp.
<6758.T>.
With no production facilities of its own, Lexar also buys
memory chips from some of those same companies. Those supply
agreements will stay in place after the takeover, according to
Michael Sadler, Micron's vice president of worldwide sales.
"They are a customer of ours right now as well and it's
safe to say that this is going to grow significantly, but it
will be difficult to speculate on that," Sadler told Reuters in
an interview.
Earlier this month, Lexar warned it would lose more money
than previously thought. It had said earlier that sales of more
profitable products were lower than expected.
Kim of iSuppli said Lexar's financial performance would
benefit from being directly plugged into Micron's production
capacity, which is growing through the venture with Intel.
"One of Lexar's shortcomings or Achilles' heels was that
they didn't have control of the silicon piece, they had to buy
it on the open market, always relying on some other party,"
Sadler said.
"What they needed was some in-house silicon manufacturing
muscle and we think we bring that to the table."
(Additional reporting by Yinka Adegoke in New York)
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