Mark LaPedus

EE Times

(03/08/2006 9:39 AM EST)

SAN JOSE, Calif. — In a bold entry into the flash-memory card, USB drive and other end-user markets, Micron Technology Inc. said that it has acquired Lexar Media Inc. The deal is valued at $688 million in stock.

The move propels Micron (Boise, Idaho) into the flash-card business and puts the memory chip maker in direct competition against SanDisk Corp. It also pits Micron and its flash-memory partner, Intel Corp., up against the formidable team of San Disk and its partner, Toshiba Corp.

Lexar (Fremont, Calif.) is a marketer and manufacturer of NAND flash memory products, including memory cards, USB flash drives, card readers and ATA controller technology for the digital photography, consumer electronics, industrial and communications markets.

The acquisition will strengthen Micron`s position in the NAND flash business. The merger is designed to combine Micron`s technology and manufacturing efforts in NAND flash memory with Lexar`s expertise in system design technology, brand recognition and the retail channels.

In effect, the combined companies are creating a vertically integrated entity focused on the NAND business.

``With this acquisition, Micron will have a complete package of NAND memory solutions for our customers,`` said Steve Appleton, Micron chairman, CEO and president. ``Together with our NAND designs, technology, manufacturing capability and distribution channels, Micron is in a strong position to serve the flash storage requirements of consumer electronics and enterprise customers.``

Micron, best known as a leading DRAM manufacturer, has been seeking to diversify into other technology areas and away from the intensely competitive commodity DRAM market for some time. In addition, the company has been shipping NAND flash memory and recently formed a flash-memory venture with Intel Corp., dubbed IM Flash.

In a move to support its fast-growing CMOS image sensor business, Micron recently purchased an 8-inch fab facility from Zilog Inc. for $5 million.

Meanwhile, the deal with Lexar also gives Micron an internal customer for flash amid a slowdown in the MP3 market. The IM Flash venture, Hynix, Samsung and Toshiba are said to sell NAND flash-memory parts to Apple Computer Inc. But Apple has reportedly cancelled part orders amid a slowdown in iPod sales.

Under terms of the agreement with Lexar, each outstanding common share of Lexar will receive 0.5625 shares of Micron stock. Micron anticipates issuing shares in exchange for 81.6 million Lexar shares outstanding. Additional Micron shares will be issued upon the exercise of assumed stock options.