SAN FRANCISO South Korea's Samsung Electronics Co. Ltd. is considering acquiring flash memory maker SanDisk Corp., according to reports. At least one Wall Street analyst said such a deal would benefit Samsung and the memory industry as a whole.
Reports from several news organizations, including Reuters and Bloomberg, quoted a Samsung spokesman as saying that the company is exploring opportunities with SanDisk, but that no decisions have been made.
Korean language website Edaily initially broke the story and reported that Samsung has engaged JPMorgan as an advisor in the negotiations, according to the reports.
SanDisk (Milpitas, Calif.) issued a statement Friday commenting on the Samsung speculation. "SanDisk periodically has conversations with multiple parties, including Samsung, regarding a variety of potential business opportunities," the statement said. "We evaluate all of these opportunities, but maintain a policy of not commenting on market rumors or speculation."
Samsung is the world's No. 1 supplier of NAND flash memory, owning an estimated 43 percent share of the market during the second quarter of this year, according to market analyst iSuppli Corp. (El Segundo, Calif.). SanDisk is the inventor and No. 1 supplier of NAND flash memory cards used in consumer electronics devices like digital cameras.
Samsung pays SanDisk significant royalties on SD flash memory cards. The two companies have fought legal squabbles over the licensing terms. Acquiring SanDisk would enable Samsung to avoid such royalties, as well as provide other strategic advantages.
In a research note published Friday, Lehman Brothers analyst C.W. Chung said Samsung pays SanDisk annual royalties on flash memory patents of $400 million to $500 million. With SanDisk's current market capitalization at around $3 billion, this could serve as reason enough for Samsung to acquire SanDisk, Chung said.
Chung said it would be a positive development for Samsung as well as the overall memory market if the company succeeded in acquiring SanDisk at a reasonable price. "We may take this type of M&A activity as a signal of the nearing of the memory bottom, as industry consolidation is typical of previous bottoms for the memory market," Chung wrote.
Chung noted that an acquisition would face hurdles, notably potential anti-trust issues and issues related to SanDisk's joint venture with Toshiba. In June, Toshiba indicated that it would cease production in the two companies' 200mm joint venture fab. Toshiba and SanDisk continue to operate a 300 mm NAND flash joint manufacturing venture in Japan.
Last month, a rumor circulated at the Flash Memory Summit in Santa Clara, Calif. that Seagate Technology Inc. was interested in acquiring SanDisk.