Analyst: Seagate after Intel's share of flash memory firm

Speculation comes as joint venture builds more products for depressed NAND market

Seagate Technology LLC may be pursuing a buyout of Intel Corp.'s 49% stake in IM Flash Technologies, a NAND flash memory vendor that's a joint venture of Intel and Micron Technology Inc., according to an analyst report issued today.

In the report, Lazard Capital Markets analyst Daniel Amir speculated that Seagate could be a prime suitor for Intel's share of IM Flash Technologies, because it is interested in expanding its business by offering increasingly popular solid-state drives in addition to physical disk drives.

Amir could not be reached for comment. Representatives of Intel, Seagate and Micron all declined comment on the Lazard Capital Markets report.

IM Flash Technologies has kept busy this year, announcing the fruits of several NAND flash projects. Last month, Intel and Micron unveiled a 34-nanometer, 32-gigabit NAND flash memory chip. In February, the partners debuted high-speed NAND flash memory based on 8GB single-level cell memory technology that they said can transfer data at speeds up to five times faster than conventional NAND technology.

Avi Cohen, head of research at brokerage firm Avian Securities LLC, said Intel is likely growing dissatisfied with its two-year-old investment in IM Flash Technologies because the NAND flash memory market that has been slumping as a result of massive product oversupply and high prices. He noted that Intel, STMicroelectronics and investment firm Francisco Partners LP formed a joint venture called Numonyx BV to take over Intel's NOR flash memory business. 

"Is it completely out of the realm of possibility [for Intel to abandon NAND flash] like they've exited NOR and several other business units? The answer is no," said Cohen.

Currently, the leading suppliers of NAND flash include IM Flash Technologies, Samsung, Hynix Semiconductor Inc., and a joint venture between Toshiba Corp. and SanDisk Corp.

It makes sense that Seagate would be interested in acquiring a NAND flash manufacturer, said Cohen, since the company has bet that solid-state technology will be adopted first by corporate users that can afford the technology. Analysts have predicted that demand for solid-state technology would start to outpace demand for physical spinning disks in data centers, possibly as soon as later this year, as IT managers look to improve transaction processing and Web services response times.

"Companies are willing to pay higher prices for solid-state drives, and Seagate could tailor the drives to [data centers], where it makes the most sense to use them," added Cohen.

If Seagate did purchase Intel's share of IM Flash Technologies, Cohen noted that it may end up owing royalties on multilevel cell technology usage to SanDisk. Intel currently holds a cross-licensing agreement with SanDisk to use its MLC, but the deal could evaporate if Intel sells its stake in IM Flash Technologies, he said.

Copyright © 2008 IDG Communications, Inc.

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