Micron jumps on Elpida acquistion

by Paul Wilson | Sunday, Jul 1, 2012 | 535 views

Shares of Micron Technology were up as the chipmaker announced the much anticipated plan for the acquisition of Elpida Memory, the Japanese firm, in a $2.5 billion deal. In the early day trading the shares of Micron were trading up by 6 per cent to $6.70.

Following weeks of speculation, Micron confirmed the reports that it had reached on an agreement on buying Elpida, a move which is likely to boost their position in the chip market according to the market analysts. As per the deal, according to the company, Micron will be acquiring 100 % of the equity of Elpida for an amount of $750 million.

In addition to this , $1.75 billion will be paid by Micron in the future annual installments to be paid till 2019 out of the cash flow generated from foundry services that will be provided by Elpida, as a subsidiary of Micron. Mark Durcan, the CEO of Micron, said in his statement that firm was looking at making an industry-leading pure-play memory firm. The transactions of the present will help in strengthening the market positions of both the firms, he added.

This will definitely provide a short-term positive for Micron as a long-hanging of uncertainty over Micron paying or not paying for Elpida will finally be removed, according to the market experts. The deal marks a major structural change boding well for the long term health of the DRAM industry.

Micron, today, is not only viewed as a strong emerging player in the changing markets of DRAM memory but is also slowing growing its market share in the NAND flash processors.

DRAM processors are mainly used in computers and servers. NAND flash devices are used in smartphones, tablets, MP3s and digital cameras. Flash is also the foundation for solid-state drives that are being adopted by a wide range of products inclusive of servers and PCs.

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