LEXR...
Memory sticks, removable cartridges about the size of a stick of gum, were developed by Sony in 1998 to record various kinds of digital media for use in its digital cameras, personal digital assistants, or PDAs, and cell phones.
In April 2000, Lexar signed a licensing agreement with Sony, acquiring the rights to manufacture and distribute memory sticks "in-house," according to Kim Evans, a Lexar spokeswoman. Under the agreement the memory sticks are built to Sony specifications, but are customized and sold under the Lexar name.
According to Sony's press release, Samsung not only gets in-house manufacturing rights, but also will expand the memory stick compatibility of its product range and will begin bundling memory stick media with compatible products.
Lexar's Evans said Lexar is one of "only a couple" companies licensed to make memory cards and had not yet heard of Sony's deal with Samsung.
According to Lexar's most recent annual report - filed last April with the Securities and Exchange Commission - the company manufactures memory sticks and compact flash technology, and plans to expand additional flash card formats in 2003.
The same filing shows that Lexar finalized a supply agreement and license agreement with Samsung, in which Lexar buys almost all of its flash memory from Samsung. The agreement also gives Samsung the right buy Lexar's controllers, which are used in flash memory products.
Memory sticks are among a handful of products Lexar designates as flash cards. Flash card sales comprised 85.4% of Lexar's gross revenues in 2002, according to the annual report. Lexar doesn't break down sales by individual products, but Evans said the memory stick is a big part of its business.
Representatives for Samsung and Sony were not immediately available for comment.
WR Hambrecht does not have an investment banking relationship with Lexar, Sony, Samsung and Sandisk; the firm's analyst, Chillara, does not own stock in any of the companies.
The selloff in Lexar's stock has accelerated in the afternoon portion of Wedneday's session. Shares recently changed hands at $10.98, down 21.3%.
-By Gretchen L. Wilson; Dow Jones Newswires; 201-938-5394.
