ISuppli analyst Nam Hyung Kim says Spansion's decline raises the specter of acquisition and signals continued consolidation for the flash industry. But Kim argues that Spansion isn't nearly the worst off in the memory sector and says investors should expect DRAM makers to be the next area of consolidation.

For the NOR sector, however, consolidation is nothing new: Last year European chipmaker STMicroelectronics (nyse: STM - news - people ) rolled its flash business with Intel's (nasdaq: INTC - news - people ) NOR business to create Switzerland-based Numonyx.

Earlier this month, Spansion put itself on the auction block and announced a delay in interest payments on outstanding loans. In response to the announcement, credit rating firm Fitch downgraded Spansion's credit to 'CCC,' a "junk" investment grade. According to Fitch, the rating reflects the agency's belief that "Spansion's default is imminent."

The company has some $1.2 billion in outstanding debt, but bankruptcy is not a likely outcome, Kim says. "I'm not sure why people widely speculate about their bankruptcy," he adds, noting that the company does not have significant debt maturing this year.

"Spansion has not released their fourth-quarter earnings yet, but up to last quarter Spansion still generated cash from their operations, which is better than many other memory suppliers," Kim notes.

Despite Spansion's woes, the company's stock won't be delisted immediately. Nasdaq, which typically requires that a stock have a minimum $1 closing bid price, suspended its requirements

http://www.forbes.com/2009/01/26/spa...