"This business will not be a drag on Intel Corporation," said Paul Otellini, Intel's CEO, back in March, "we're going to fix it, or we're going to make sure it's profitable, one way or another."
Otellini was telling analysts about Intel's NAND flash memory joint venture with Micron called IMFlash.
One particularly snotty analyst asked Otellini for an explanation why he was staying in the NAND business. If no such explanation was forthcoming, the analyst inferred, he would be unable to recommend Intel's shares to investors.
So poor old Paul has to dump another attempted diversification or see his share price stagnate and his options values wilt.
Poor old Paul had to sell 128 million Intel share options for a profit of a lousy $145,000 last March. He really needs the Intel share price to go up.
So could hard disc maker Seagate 'do a SanDisk' and buy up Intel's share in IMFlash and put some value into poor old Paul's options?
It makes some sort of sense. SanDisk which sells packaged flash chips in the form of dongles, SSDs and MP3 players and the like, went into a flash joint venture with Toshiba to gain access to flash chip manufacturing capacity.
Applying the same analysis, you could see Seagate thinking that, with the HDD market apparently going to move to SSD (so the pundits say anyway) then it might be a good time to get access to flash chip manufacturing capacity.
This seems like the kind of thinking indulged in by ivory tower analysts. (Indeed in this case it did come from a Lazard analyst).
However, another analyst, from Avian Securities called Avi Cohen says that Seagate has talked to Hynix about flash manufacturing capacity so it is definitely interested in acquiring some.
So the Intel share price might see some upside if Seagate buys it out of IMFlash but, if it does, Intel's reputation for managing diversification will only see further downside.
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Comments (2)
"If no such explanation was forthcoming, the analyst inferred, he would be unable to recommend Intel's shares to investors."
Either the observer, or Otellini, might have inferred such a result, but only if the analyst were understood to be implying it.
And how does one get a profit of about $.001 per share in a market where stocks are mostly valued in $.01 increments?
Posted by Peter B | July 9, 2008 9:13 AM
Posted on July 9, 2008 09:13
You are correct Peter. Implied was the word that should have been used.
I suppose .0001 was a commentary on the result of the transaction rather than an indication of any particular share's value.
Posted by David Manners | July 9, 2008 11:12 AM
Posted on July 9, 2008 11:12