Analyst: Micron-Qimonda Deal Imminent
09/22/08 - 01:29 PM EDT
Alexei Oreskovic
Micron(MU Quote - Cramer on MU - Stock Picks) is moving closer to acquiring troubled memory chip rival Qimonda(QI Quote - Cramer on QI - Stock Picks), industry sources say.
Gregory Wong, a memory analyst with Forward Insights, says his industry contracts have told him it's effectively a done deal. The parties "meet on all the major issues," although the transaction has not yet been finalized, he said. Reports that the companies were in merger talks surfaced nearly a month ago that a deal may be close at hand. On Monday, American Technology Research analyst Doug Freedman wrote in a note that an acquisition by Micron now appears likely, strengthening Micron's ability to control supply and intellectual property in the memory business and positioning Micron to become one of the two memory firms, alongside Samsung, to survive the current market downturn. Qimonda is a subsidiary of German chipmaker Infineon Technologies(IFX Quote - Cramer on IFX - Stock Picks), which is seeking to unload its 77% stake in the company. In July, Infineon re-classified Qimonda as a "discontinued operation" on its financial statement. Micron spokesperson Dan Francisco said the company does not comment on rumor or conjecture. An Infineon spokesman said he had "no information" about any deal, and a Qimonda representative could not be reached for comment. Qimonda has lost roughly $2.3 billion so far this year, as a severe oversupply of DRAM memory chips has compressed prices for its products. Shares of Qimonda are down 79% from their 52-week high of $11.50, leaving Qimonda's market cap at just north of $700 million. That low valuation has sparked interest in the company's assets, particularly its network of fabs -- chip manufacturing facilities which typically cost $1 billion or more to build. Qimonda currently owns three chip fabrication facilities as well as a joint-venture that entitles it to half the output of another fab. As makers of DRAM memory and flash memory chips suffer through one of the industry's worst downturns in years, the market is ripe for consolidation.
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