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Micron sees tie-ups a road to success

Posted by iNext - 2005-11-05

Micron Technology Inc. sees partnerships with other companies as a strategy to improve performance, Chief Executive Steve Appleton said on Wednesday amid speculation that Micron might form a partnership with Intel Corp.
Prudential Equity Group said in a Tuesday report that Intel and Micron could announce a NAND flash memory joint venture in the coming weeks, with production based at Micron's Manassas, Virginia facility.

Appleton declined to comment on the possibility of a tie-up with Intel but also said that the computer industry would move in coming years to using flash memory instead of hard disk drives for primary storage devices.

"We have the technology," Appleton said on Wednesday at the Reuters Semiconductors Summit in San Francisco. "We wake up and we're in a great spot."

Appleton said partnerships are one of three paths for Micron to pursue to increase shareholder value. The other two are shifting to more profitable markets and benefiting from industry consolidation, he said.

Prudential analyst Mark Lipacis predicted shipments in the Micron-Intel venture to start in early 2007.

"We believe Intel's primary reason for entering into the NAND space is to drive increased PC utility" by reducing boot-up time and extending battery life, wrote Lipacis, who has an "underweight" rating on Intel stock.

Appleton said he expects one or two of the five largest makers of dynamic random access computer memory, or DRAM, technology to disappear in the next one or two years.

The five biggest DRAM makers are Samsung Electronics Co. (006660.KS), Hynix Semiconductor Inc. (000660.KS), Infineon (IFXGn.DE) of Germany, Japan's Elpida Memory Inc. (6665.T) and Micron.

Micron has been helped by surging sales of NAND flash memory used in portable devices such as mobile phones, digital cameras and music players. Appleton said he expects flash memory to replace disk drives in notebook computers within five years as prices decline.

That would bring dramatic increases in battery-powered computer operation since flash memory, with no moving parts, uses far less energy than hard drives with whirling disks.

Makers of mobile phones, music players and other portable digital devices are increasingly using NAND memory because it is suitable for pictures and music downloads and is cheaper than the technology used in Intel's flash memory, called NOR.

Intel has said it is considering options for addressing the NAND memory market. The company has declined to comment on possible talks with Micron.

NAND flash memory uses less power than older technology, extending battery life. "There's not a lot of limitations on it," Appleton said at the summit. "Battery life without a mechanical drive is almost infinity on a notebook device."

Flash memory now makes up a greater percentage of Micron's sales as the company's main memory chips for computers accounted for 50 percent of sales in the fourth quarter, down from 60 percent in the third quarter and 64 percent in the second, according to company reports.

"NAND is encroaching on traditional NOR," Appleton said. "It's a foregone conclusion that the NAND flash business will be magnitudes bigger than the NOR solution."

Micron, which returned to profit in 2004 after three straight annual losses, is expected to report first-quarter 2006 earnings of 12 cents per share before exceptional items, according to the average forecast of analysts surveyed by Reuters Estimates.

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