Micron will buy Swiss chip maker

Fresh off its first quarterly profit in nearly three years, Micron Technology showed Tuesday that it can still make big plays in the computer memory industry.

The Boise chip maker said it would acquire a Swiss flash-memory maker by issuing 140 million to 150 million shares of Micron stock to the Swiss company's shareholders. The deal values the Swiss company, a 2-year-old privately held firm called Numonyx, at $1.27 billion.

That's nearly three times the size of Micron's last big acquisition, the October 2008 purchase of a share of a Taiwanese maker of dynamic random-access memory for $400 million in cash.

The latest move represents Micron's continuing fight to thrive despite the extended downturn in memory market that began in 2006. Micron lost about $3.9 billion over 11 quarters before reporting a $204 million profit in December, driven in part by cost-cutting. Micron closed its memory fabrication line in Boise last year, ending about 2,000 Treasure Valley jobs on top of about 1,500 local layoffs in 2008.

The Numonyx acquisition follows last week's announcement that Micron and Intel Corp. had figured out how to squeeze computer memory into even tinier spaces with the world's first eight-gigabyte, 25-nanometer (that's 25 billionths of a meter) flash memory chip.

Flash - nonmoving memory that retains data even when turned off - is common in cell phones, cameras and other computer applications. It is Micron's No. 2 product, after DRAM, the most common type of memory in personal computers.

Micron is acquiring Numonyx from its three owners: Francisco Partners and chip makers Intel Corp. and STMicroelectronics NV. Micron already has a joint venture with Intel.

Numonyx was created by the companies in 2008. Numonyx manufactures so-called NOR memory, used in mobile devices like cell phones and personal digital assistants. (NOR is a computer logic term that stands for not-or. NAND, the type of flash memory Micron makes, stands for not-and.)

The acquisition gives Micron a better gross profit margin - what it makes on every part it sells - because it will now provide more crucial components for cell phones. That gives the company bargaining power, said Kevin Jones, a partner in Harmonic Investment Advisors in Boise.

Micron took a hit in recent years when its bread and butter DRAM memory went through a "recession" and dropped in price, Jones said. But the company emerged from the downturn better positioned to move forward than most of its competitors, he said.

"Micron is one of the companies that came out of the DRAM recession with money to spend," Jones said. "Now that DRAM business is turned around and they are assured of the capital, they are trying to pursue the strategic businesses they pursued before."

Jones said DRAM is a commodity, but NAND and NOR memory are emerging technologies that command higher profits.

"By layering this in with the original company ... they are basically insulating themselves against price declines and turning themselves into more of a high technology company instead of a manufacturing company," Jones said.

Micron is also diversifying beyond computer memory. It is working with an Australian company to develop new solar power technology.

If approved by regulators, the Numonyx acquisition will position Micron Technology second only to Samsung in terms of market share measured by revenue, CEO Steve Appleton said.

"Obviously, we think it's a good deal for us, and we also think it is a good deal for Numonyx," Appleton said.

Micron plans to issue 140 million shares, but could add up to 10 million additional shares depending on Micron's average share price for 20 trading days. The transaction is expected to close within three to six months, pending regulatory approval, officials said.

Micron expects the transaction to add to its earnings beginning in 2011.

In the last quarter, Micron posted revenues of $1.74 billion. Numonyx posted quarterly revenues of $547 million.

Appleton said Micron had looked at the potential for acquiring Numonyx since Numonyx's creation two years ago.

"At that time, it didn't make sense for us really to engage," Appleton said. "We have continued to just watch the market evolve. It's been an intermittent dialogue. The industry, going through the challenges it's been through ... the last 18-24 months ... was a catalyst for companies trying to think differently about what is the right business model."

Today, Micron has about 5,000 employees in Idaho.

Its stock closed Tuesday at $9.08 in Nasdaq trading. Micron said the Numonyx purchase would increase the number of outstanding shares by about 15 percent. The announcement sent the share price down 2 cents by 9 p.m. in after-hours trading.

Kathleen Kreller: 377-6418. Local News Editor David Staats contributed.