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Analysts take on Micron-Numonyx deal

Posted: 12 Feb 2010 ?? ?Print Version ?Bookmark and Share

Keywords:Micron-Numonyx deal? NOR flash? NAND flash? memory market?

Micron Technology Inc. has agreed to acquire Numonyx Holdings B.V. in a stock transaction valued at $1.27 billion.

There have been rumors circulating about this deal since late last year. The deal propels Micron into the NOR and phase-change memory (PCM) sectors. Micron also expands its thrust into NAND flash.

Here's what analysts are saying about the deal:

"Micron's goal is to become like Samsung, a one-stop shop for memory that has NAND, DRAM and NOR assets. NOR is the only part it lacks. The NOR market is dominated by three players, with Numonyx and Spansion leading the market and Samsung a distant third. It is a good-sized market of $4 billion per year, growing 3-5 percent per year," said Daniel Amir, an analyst at Lazard Capital Markets. He added, "We believe the Street will react to the transaction negatively due to the 15 percent EPS dilution, lackluster growth in the NOR market, and unclear benefits. Our opinion is that this transaction will take time to bear fruitin the long run NOR has much higher gross margin than DRAM/NAND, and share gains in memory will be significant as customers realize Micron is vital to balancing out Samsung's position in the industry. We remain positive on the memory markets in 2010."

Jim Handy, analyst with Objective Analysis, commented. "Micron re-enters NOR. Micron itself participated in NOR starting in the late 1990s, but abandoned this effort in 2006. Numonyx is first and foremost a manufacturer of high-density NOR flash. NOR flash has been a large market, but not a profitable one. High-density NOR competes against NAND for camera phone designs, and NAND prices have been depressed for the last three years, dragging NOR prices down with them."

Handy further explained, "By acquiring Numonyx, Micron is buying the current leader in the (NOR) market, a position Numonyx is believed to have held for the past two quarters. Numonyx should add roughly $1.5 billion to Micron's revenue stream at today's run rate, increasing the company's share of the semiconductor memory market. All in all Objective Analysis anticipates that this will be a good deal for both buyer and sellers. This is the kind of deal we expected to see more of during the current downturn, a kind of hallmark for Micron."

Gartner analyst Joseph Unsworth said, "The Numonyx acquisition will make sense for Micron if they can quickly integrate the business, support and grow the existing customer base and establish themselves in MCP. While the embedded business for Numonyx is stable, the wireless NOR business represents the majority of sales and will be under severe pressure as NAND makes greater inroads into the handset. Micron must counter this with its NAND/DRAM handset solutions which thus far have limited penetration."

Unsworth added, "Micron must also exploit the more diverse customer base and larger economies of scale, a larger IP portfolio, and PCM technology from Numonyx in an effort to support the growing, enormous capex demands of its DRAM and NAND business. The key to this acquisition will be the execution of integration and commitment to the Numonyx customers."

- Mark LaPedus
EE Times

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