Micron plans to spin off its division that makes sensors used in cameras and cell phones, into a separate company so Micron can focus on memory manufacturing, Chairman and CEO Steve Appleton said Thursday.And despite heavy losses lately, Micron is willing to spend money to seize opportunities to consolidate the industry and bolster the company’s dynamic random-access memory and flash memory businesses, Appleton told analysts.”We’re well positioned to participate as opportunities come up,” he said at the company’s annual analysts conference, held this year in Salt Lake City. “If you look at the strength of our cash balance sheet, it’s very significant, and it’s very good.”Spinning off image sensors into a separate company would mark the end of a diversification effort the company hoped would reduce its reliance on cyclical DRAM and flash memory. Low memory prices led to $262 million in losses in Micron’s latest fiscal year and contributed to the layoffs of more than 1,100 employees in the Treasure Valley. Micron has about 9,000 employees and is Idaho’s biggest private employer. A Micron downturn hurts the state’s economy and state and local government tax revenues. But the image sensor business has not met expectations.”It (image sensors) will be separate, and we’re looking at various opportunities,” Appleton said. “We like the business a lot, but we can’t do justice to the business in its current form.”Appleton said Micron may look at a partnership.The impact of a spinoff on Boise was not immediately clear, but is likely to be modest. Much of Micron’s image-sensing manufacturing occurs at two plants in Italy, and most of its research, development and design takes place in San Jose, Calif., and Pasadena, Calif.Over the last year, analysts have strongly suggested that Micron distance itself from the image-sensor business. The sensors are profitable, but sales have grown slowly and account for only about 10 percent of the company’s revenue - not the one-third the company sought a few years ago. Micron lately has put more resources into flash memory production instead. Flash chips are used in flash drives, camera memory cards, mobile phones and digital music players.Analysts at UBS said last week that spinning off the image sensor business would likely boost Micron’s struggling stock price. Over the last year, Micron’s stock has traded between $5.47 and $14.20 a share. Micron closed up 13 cents Thursday at $7.12.”We view a potential divesture as a positive for the company as we believe Micron would likely maintain a minority-interest stake in the new entity and benefit from future profits, further reduce operating expenses and enjoy more stable margins,” the analysts said. The firm rates Micron stock a “buy.”Despite the dramatic declines in prices for DRAM, the most common type of memory used in computers, and flash, Appleton told analysts he’s excited about how the price declines will drive change in the industry.”In some ways I’m more excited than I have been for a long time,” he said. “Finally something is happening to drive real change in the industry.”Given the tough environment for pricing, Appleton said that the only way companies can survive is to manufacture both DRAM and NAND memory. He said only three companies - Samsung, Hynix and Micron - do that now.DRAM prices have dropped in some cases to a level where it is costing companies more to manufacture the memory than they can sell it for. NAND prices have also dropped, but companies are still making money on the chips. Appleton said the two chips complement each other, and companies can use similar manufacturing and research and development for both. He expects that the companies focusing solely on DRAM will either go out of business, be purchased by bigger companies that already have NAND, or try to start offering NAND themselves. Appleton said that should drive further consolidation in the industry.Other than Micron’s failed attempt to buy South Korean-based Hynix Semiconductor in 2002, Appleton said there hasn’t been any true consolidation over the last five years.Earlier this week, Micron was rumored to be in talks to buy Qimonda, a German-based DRAM maker. But on Thursday, The Wall Street Journal reported that executives with Infineon Technologies, which owns the majority stake in Qimonda, denied they were in talks with Micron.”As a basic principle, we do not comment on rumors, but we are not in talks with Micron about an issue like that,” Chief Executive Wolfgang Ziebart said in a conference call with journalists, the Journal reported.Micron didn’t share specific financial data with analysts Thursday, but Appleton said the company’s cost-cutting efforts are helping bring operating costs more in line with Micron’s competitors.Ken Dey: 672-6757
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