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Analyst: Spansion has three options

Posted: 10 Mar 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Spansion options? Spansion bankruptcy? NOR flash?

What's next for Spansion Inc. after filing for bankruptcy amid growing anger among its former employees?

Jim Handy, an analyst with Objective Analysis, said that Spansion has three options: a merger with another company; re-working the company into a new Spansion; getting additional financing options.

Insiders at Spansion see Micron Technology Inc. and/or Toshiba Corp. eventually buying Spansion, which has a strong IP portfolio in flash memory. For example, Spansion has a new memory technology, dubbed EcoRAM. The new memory device is designed to solve the energy consumption crisis in datacenters.

Other possible suitors could include Japan's Elpida Memory Inc. and Taiwan's Macronix International Co. Ltd, according to other insiders. "But given the state of market, I would think the interest (in buying Spansion) would wane," one source said.

Until then, Spansion "is simply using the protection offered by U.S. bankruptcy laws to find a better business model that will see it through the current downturn," Handy said in a report. "Spansion tells us that this step allows the company to continue to satisfy their customers' needs while conserving cash."

There are no plans to dissolve the company. "Spansion is very careful to reassure that there are no plans for the company to be liquidated," Handy said. "Spansion is the market share leader in NOR, and the loss of the company would be devastating both to the NOR business and to Spansion's customers."

On the other hand, "Spansion has eliminated or postponed projects that have no near-term return, directing their focus on the 'here and now' rather than the long term," he added.

Spansion itself declined to elaborate on its "postponed projects." The company reiterated that it is still in business. "We are alive and well and shipping products," said Tom Eby, executive VP of Spansion's consumer, set-top box and industrial division.

Eby also reiterated what Spansion's new CEO said at the time of the Chapter 11 filing earlier this week. "Given our focus on Spansion's future, management and the board have concluded that Chapter 11 provides the most effective means for Spansion to preserve its business, meet its post-petition obligations and maintain customer confidence and continuity while we complete this restructuring," said President and CEO John Kispert, in a statement earlier this week.

But the prospects remain grim for Spansion and other suppliers of NOR flash, including Numonyx, Samsung, SST, and others. Numonyx is the memory spin-off of Intel Corp. and STMicroelectronics Inc.

NOR vs. NAND
"In the fourth quarter a decline in end-user demand caused NOR unit shipments to plunge," Handy said. "In all prior years NOR unit shipments have followed a cycle, with quarterly increases from Q1-Q4 before a seasonal drop-off in the first quarter. Last year NOR unit shipments collapsed in the fourth quarter to a level not seen since early 2005."

There are other issues in NOR. "Oddly enough, the leading NOR makers are suffering because of an oversupply of a completely different technology: NAND flash," Handy said.

"How does NAND compete with NOR? Camera phones are the key market for high-density NOR flash. Camera phones can be designed either to use a large NOR to store both the phone's firmware and the camera's pictures, or to use a small NOR for firmware teamed up with a NAND for pictures," he said.

"Some designs are even converting to NAND alone. Unless the high-density NOR is sold at a very low price, today's cheap NAND is likely to capture the bulk of the design's flash revenues," he said. "One gigabyte of NAND today sells for only about 10 percent of the price it commanded in the middle of 2007. NAND's price slide is dragging down high-density NOR prices, vacuuming all the profit out of the market for the two leaders."

- Mark LaPedus
EE Times





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