Poor Old Numonyx

Poor Old Numonyx, it never stood much of a chance. It was formed from two loss-making businesses and was still making losses when it was sold, today, to Micron.

Its birth was accompanied by pangs of financial pain. Under the original terms of the joint venture deal, Intel and ST expected to share a $900 million payout.

 

The banks backing Numonyx were expected to put up a $1.3 billion loan and a $250 million revolving credit to finance the joint venture, and $900 million of that $1.3 billion was to be shared as a cash hand-out to Intel and ST.

 

Then the credit crunch started to hit. The banks re-thought.

 

Instead of the $1.3 billion loan, the banks would now only put up a $650 million loan, while insisting that some $400 million of the loan had to go to Numonyx, and not to Intel and ST.

 

That left $250 million for Intel and ST.  ST ended up with about $130 million of it which was further reduced by a  $30 million re-structuring charge.

 

So poor old Numonyx got started on a loan of $400 million, and a revolving credit of $250 million.

 

Which was not much for a venture which, on the Intel side alone, had been losing about $300 million a quarter.

 

ST made it plain at the time that it was unprepared to put any money into the company in the future.

 

Numonyx’s own production never got onto anything better than 90nm. Its products never made it to densities higher than 1Gbit.

 

For higher density memories, or 3bit-per-cell technology, Numonyx relied on its partner, Hynix.

 

Almost as a fig-leaf to mask its problems, Numonyx made a song and dance about its phase-change memory technology as a possible replacement for floating gate flash, but it never made a part denser than 128Mbit, at a time when the leading edge for commercial floating gate memories is 32Gbit.

 

The technology was dubbed a Techno-Ponzi scheme – designed to keep investors sweet.

 

So poor old Numonyx was born sickly, lived sickly, and now departs to its Idaho resting place as a sickly soul.

Tags: credit crunch, joint venture, memories

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6 Comments

  1. David Manners
    February 16, 2010 21:37

    That’s an interesting point, Garry

  2. garry Scoble
    February 16, 2010 20:27

    i think there is a new scale of things financial ( developed from the marconi days)
    When you owe a few million its your problem
    when you owe a few billion it the banks problem
    when you owe 100′s of Billions its the goverments problem.
    it gives the financial guys a way to pass the buck , just make the problem bigger and then it becomes some-else’s problem.

  3. David Manners
    February 16, 2010 14:14

    I agree, Bill, there are some evil b******s around – the trick is not to work for them

  4. David Manners
    February 16, 2010 14:09

    Well Garry, I think they may have done. After all, the bankers started by agreeing to a $1.3 billion loan of which $900 million was going to go to Intel and ST. Then, either they thought: ‘Those guys have been telling porkies’, or they thought: ‘Holy Moses the credit crunch is coming’ , and said they’d only put up a $650 million loan, of which Intel and ST could only have $250 million. The whole thing looked such a non-starter it is amazing, as you say, that the banks went for it. But, as we now know, these guys are very very silly.

  5. February 16, 2010 13:41

    i would have loved to have been a fly on the wall when ST and Intel pitched to the banks
    Did the bankers check for crossed fingers behind the backs and growing noses.

  6. February 16, 2010 13:25

    Hmmmm, driving by the now abandoned NXP fab in East Fishkill, NY I am reminded of the continual folly of get rich quick schemes in the semiconductor industry. Like PT Barnum said, there’s a sucker born every minute and the only real losers are the employees of these jaded ventures.

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