Micron Technology Inc. said late Thursday it plans to buy out Intel Corp.’s share of a flash memory joint venture that the two chip makers have participated in for more than a decade.
Micron MU, -2.48% agreed to pay Intel $1.5 billion for its stake of their IM Flash Technologies joint venture, and expects to close the deal in six to 12 months after it is able to exercise call options on Jan. 1. On a conference call, Chief Financial Officer Dave Zinsner said Micron will pay for the buyout from free cash flow while continuing with its plan to buy back its own shares.
“We ran the calculus whether that was a good deal and we think the [return on investment] on this is very good,” Zinsner said on the call, noting that a total of $6 billion had been invested in IM Flash’s Lehi, Utah-based facility.
Zinsner added that the Utah fab is not only located relatively close to the company’s Boise, Idaho, headquarters, but is also the only fab in the world making 3-D XPoint technology, a kind of nonvolatile memory that is meant to improve storage performance and reduce server memory costs.
Read: Micron CEO: Memory-chip market is ‘structurally different’ in post-PC world
As recently as July, Micron and Intel INTC, -2.00% announced they would complete development of a second generation of 3-D XPoint tech by the first half of 2019 before ending their partnership. Under existing agreements, Micron will sell 3-D XPoint memory wafers to Intel for up to a year after the deal’s close.
“Micron’s acquisition of IM Flash demonstrates our strong belief that 3-D XPoint technology and other emerging memories will provide a unique differentiator for the company and be an essential solution for new data-hungry applications,” Sanjay Mehrotra, Micron’s president and chief executive, said in a statement.
The companies will continue to jointly manufacture 3-D XPoint memory products at the Utah fab until the deal closes. Back in 2012, Micron and Intel expanded the flash memory joint venture, which began in 2006.
Micron shares rose 0.3% after hours, following a 2.5% decline to close the regular session at $41.30. Intel shares also gained 0.3% after hours, following a 2% drop to close at $44.97 on Thursday. By comparison, the PHLX Semiconductor Index SOX, -2.51% fell 2.5%, the Dow Jones Industrial Average DJIA, -1.27% declined 1.3%, the S&P 500 index SPX, -1.44% shed 1.4%, and the tech-heavy Nasdaq Composite Index COMP, -2.06% gave up 2.1%.
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