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yalanand
@dylan, thanks for the update. Accordng to your estimate what is the exact ...
resistion
I guess the point of all the sources of negative comments was, why bother to ...
Micron reportedly strikes $2.5B deal for Eplida
Dylan McGrath
6/28/2012 3:39 PM EDT
SAN FRANCISCO—U.S.-based memory chip vendor Micron Technology Inc. has reached a deal to acquire bankrupt Japanese DRAM vendor Elpida Memory Inc. for roughly 200 billion yen (about $2.5 billion), according to an English language report by Japan's Nikkei newspaper.
According to the report, about 140 billion yen (about $1.75 billion) of the acquisition price will go to pay off Elpida's debt. About 70 percent of Elpida's outstanding debt, totaling about 420 billion yen (more than $5.2 billion) won't be repaid, according to the report.
According to C.J. Muse, an analyst with Barclays Capital, the actual purchase price Micron will reportedly pay for Elpida is roughly the $1.75 billion that will go toward Elpida creditors. The remainder, about 60 billion yen ($755.5 million), will go toward investments to upgrade Elpida's production facilities, Muse said.
"While details are still limited, we believe the news is positive for shares," Muse wrote in a report circulated Thursday (June 27).
A spokesman for Micron Thursday declined to comment on the report, citing company policy not to comment on rumor or conjecture.
Muse said the price tag of $1.75 billion is more or less in line with Barclays' initial estimate of $1.75 billion to $2 billion that Micron would pay for Elpida.
According to the Nikkei report, Micron plans to invest about 100 billion yen ($1.26 billion) in Elpida's fabs, including Elpida's flagship fab in Hiroshima prefecture, to boost output.
Micron has been rumored as a suitor for Elpida since the final Japanese DRAM vendor filed for bankruptcy protection early this year. Micron was one of only two bidders to submit a final proposal to acquire Elpida in an unusual auction process that culminated in May. After initially declining to comment, Micron confirmed in May that had bid for Elpida and was in talks with Elpida's trustee to acquire the firm.
Analysts have speculated that an acquisition of Elpida by Micron would have a positive impact on the DRAM industry as a whole, primarily through consolidating and removing some of the industry's DRAM manufacturing capacity. Market research firm IHS iSuppli noted again in a report earlier this week that DRAM pricing has been markedly less volatile since Elpida's bankruptcy in February.
Elpida is due to finalize its business rehabilitation plan and submit it to the Tokyo District Court by Aug. 21, according to the Nikkei report.
According to the report, about 140 billion yen (about $1.75 billion) of the acquisition price will go to pay off Elpida's debt. About 70 percent of Elpida's outstanding debt, totaling about 420 billion yen (more than $5.2 billion) won't be repaid, according to the report.
According to C.J. Muse, an analyst with Barclays Capital, the actual purchase price Micron will reportedly pay for Elpida is roughly the $1.75 billion that will go toward Elpida creditors. The remainder, about 60 billion yen ($755.5 million), will go toward investments to upgrade Elpida's production facilities, Muse said.
"While details are still limited, we believe the news is positive for shares," Muse wrote in a report circulated Thursday (June 27).
A spokesman for Micron Thursday declined to comment on the report, citing company policy not to comment on rumor or conjecture.
Muse said the price tag of $1.75 billion is more or less in line with Barclays' initial estimate of $1.75 billion to $2 billion that Micron would pay for Elpida.
According to the Nikkei report, Micron plans to invest about 100 billion yen ($1.26 billion) in Elpida's fabs, including Elpida's flagship fab in Hiroshima prefecture, to boost output.
Micron has been rumored as a suitor for Elpida since the final Japanese DRAM vendor filed for bankruptcy protection early this year. Micron was one of only two bidders to submit a final proposal to acquire Elpida in an unusual auction process that culminated in May. After initially declining to comment, Micron confirmed in May that had bid for Elpida and was in talks with Elpida's trustee to acquire the firm.
Analysts have speculated that an acquisition of Elpida by Micron would have a positive impact on the DRAM industry as a whole, primarily through consolidating and removing some of the industry's DRAM manufacturing capacity. Market research firm IHS iSuppli noted again in a report earlier this week that DRAM pricing has been markedly less volatile since Elpida's bankruptcy in February.
Elpida is due to finalize its business rehabilitation plan and submit it to the Tokyo District Court by Aug. 21, according to the Nikkei report.
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dylan.mcgrath
6/28/2012 5:06 PM EDT
Details are sketchy at this point, and of course the entire report is unconfirmed. But if this is accurate, the purchase price seems like a song, doesn't it?
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goafrit
7/1/2012 9:00 PM EDT
I think so. I am very sure that the price is in many orders off. Why spend so much for a dead company?
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yalanand
7/2/2012 7:25 AM EDT
@dylan, thanks for the update. Accordng to your estimate what is the exact valuation of Elpida ? According to you how much premium Micron is paying for ths buyout ?
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joshxdr
6/28/2012 7:02 PM EDT
High risk high reward play by Micron. Micron has now acquired fabs from ex-DRAM players TI, Toshiba, Qimonda (Inotera JV share), and now Elpida. Elpida may be easier to digest since they use stack, while TI/Toshiba/Qimonda all used trench. I don't think you can point to any of the acquisitions to date and call it a success, especially the Inotera experience has been very tough. I wish Micron the best, but the odds are high that this acquisition will backfire.
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ibm221
6/28/2012 11:02 PM EDT
yeah, MU has a high chance of imploding...
it just lost another 300 million last quarter.
they want to lower R&D cost per chip by this move, but their R&D stinks now.
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goafrit
7/1/2012 9:01 PM EDT
Micro new management is thinking that growth and earnings come through these senseless buyouts and acquisitions. In this industry, it does not work.
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resistion
6/29/2012 2:08 AM EDT
Should be worried if Hynix suffers from this merger, what will the SK government do? Merge Samsung and Hynix?
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ibm221
6/29/2012 2:52 AM EDT
na, that won't happen.
a more possible scenario is the new combo will bankrupt in ... 2 years. (samsung and hynix could easily plot this)
and a bigger, better deal for them to take.
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resistion
6/29/2012 4:42 PM EDT
The analysts said that it would be better to not have so much DRAM manufacturing capacity. If Micron agrees, they would more likely buy Elpida if they think Elpida's DRAM technology is better (can replace Micron's DRAM technology).
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dylan.mcgrath
6/29/2012 4:50 PM EDT
What worries me a little bit is that, if this report is accurate, Micron is spending $1.75 billion to pay off Elpida's creditors, then plunking down $1.26 billion to invest in Elpida's fabs, presumably increasing capacity. If that is true, I'm afraid we won't be seeing the results the analysts hoped for in terms of reduced overall DRAM capacity.
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HeadhunterBKS
6/29/2012 10:01 PM EDT
Overall, I am happy to hear it. I am vested in a design using their products, and signs of strength that indicate longevity is nice.
They are aggressively expanding, and as I understand it, they venture into the next logical phase.
I think we will see some advances from this, but not till upgrades are complete.
In today's world, as ever, "Keep your cards close to your vest!" Good words.
B
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Sideline
7/1/2012 4:31 PM EDT
Elpida already has 25nm process so Micron just needs to finance their upgrade. Also lets not forget Taiwan. This deal ties Micron, Nanya, Inotera, Elpida, Rexchip, and Powerchip together. Micron may go bankrupt in 2 years.. or they will survive and become #2 right on Samsung's heals.
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resistion
7/1/2012 10:26 PM EDT
I doubt copying Elpida's process and transferring to all Asian subsidiaries (or evenvice versa with Micron's process) will happen successfully within 2 years. Language barriers are as strong as ever.
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SemiJunky
7/2/2012 12:34 AM EDT
Wow so much negativity here on this purchase. If there's something Micron is good at doing is absorbing other Dram companies. Inotera is just starting to bear fruit for them. All others Toshiba,TI has played and been a major successful part of Micron for more then a decade now. Micron's success is driven because there DRAM portfolio consist more of higher margin products(servers, rldram) Even though they lost money for the past few quarters doesn't mean that they'll be unsucessful. They operating cash flow was profitable even throughout the Great recession also maintaining roughly 2 billion in cash throughout this period. All those fab equipment depreciates and are written off as loses also.As far as microns new management, Duncan is doing everything that Appleton would of done. Buying low sell hi, increase production then kill the competion. Hynix should of been part of Micron if it wasn't for South Koreas government. New fab these day cost 5 billion to build also the time to find experienced employees. Micron gaining roughly 200,000 wafer per month in capacity for 1.75 billion and updating the Hiroshima plant with the remaining money is an excellent deal. They also just signed and agree with Powerchip to purchase the shares of Rexchip(pending Elpidas deal going through) Micron will not be converting to Elpidas process, they will most likely convert over to Microns more successful product mix and Elpida's mobile process will eventually get converted overa as well. Also some of that capacity will probably be converted to NAND as well.
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resistion
7/2/2012 1:13 AM EDT
I guess the point of all the sources of negative comments was, why bother to have Elpida's capacity? Isn't it too much DRAM capacity that is driving the market out of equilibrium. Natural death of excess DRAM companies was supposed to be best way out.
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