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Intel Invests $500 Million in Memory-Chip Maker Micron

October 17, 1998| From Bloomberg News

SANTA CLARA, Calif. — Intel Corp. said Friday it has invested $500 million in money-losing Micron Technology Inc. in a bid to assure a supply of high-speed memory chips to complement Intel's microprocessors, which run most of the world's personal computers.

Intel received the right to buy 6% of the shares of Boise, Idaho-based Micron, the world's No. 2 maker of memory chips, for its investment. The chips store data used in programs like spreadsheets, working in tandem with Intel's processors, which direct the PC's functions.

Memory-chip makers are closing plants, leading to forecasts of a 37% drop in sales this year, as an oversupply causes prices to plunge. Intel wants to ensure that Micron has the cash to run its factories and fund new technology that's expected to drive sales of personal computers that use Intel chips.

Micron can use the help. Its shares have plummeted from a high of $94.38 in September 1995, when memory chips were in short supply and prices were rising. Memory prices fell 70% in 1996 and 1997 and are forecast to drop 64% this year.

Micron shares rose 25 cents to $32 on the NYSE. On the Nasdaq, Intel rose $81 to $83.75.

Rambus Inc., which invented the new RDRAM technology that Intel is backing and licenses it to memory makers, including leader Samsung Corp. and Micron, was unchanged at $61.50 on the Nasdaq.

Intel Chief Executive Craig Barrett and Micron Chief Executive Steve Appleton helped negotiate the investment.

Santa Clara, Calif.-based Intel pioneered the memory-chip business in the 1970s but got out of it in the mid-1980s, when Japanese competitors were dumping the products, forcing nine of 11 U.S. memory makers out of business.

Intel wants to ensure that the last remaining U.S. memory company is healthy and competitive with Asian rivals. Intel also gets a big supplier behind a technology that will help boost demand for faster microprocessors.

The RDRAM technology will speed up computers that use Intel's processors, helping distinguish Intel from rivals and their lower-cost processors, said Drew Peck at investment bank SG Cowen & Co., who rates Intel "neutral."

Barriers to the spread of RDRAM have been price, which is 25% higher than other memory technology, and the relatively low supply.

Micron will start shipping products with the technology by the third quarter of next year. Micron also is working on technologies to compete with Rambus DRAM, which are known as SLDRAM and DDR DRAM. Those technologies are based on open standards and don't require that royalties be paid.

Speculation had been mounting that Intel would invest in cash-strapped memory-chip makers. "Our goal in making this equity investment is ensuring an adequate supply of memory components," Barrett said in a statement.

Earlier this year there was talk of an Intel investment in Samsung. Intel had $8.68 billion in cash at the end of September.

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