Samsung Electronics mulls SanDisk buy

Marie-France Han and Nathan Layne Samsung Electronics said it may buy flash
memory maker SanDisk, which is valued at $3.2 billion, in a deal that could
reshape a struggling industry.

"We are looking at various opportunities regarding SanDisk, but nothing has
been decided yet," Samsung spokesman James Chung told Reuters in response to
reports the South Korean firm was interested in the US maker of flash memory,
which is widely used in storage devices and digital gadgets.

In a regulatory filing later, Samsung said an acquisition of SanDisk was an
option.

Analysts said an acquisition could shift the balance of power in the flash
memory industry.

"Samsung buying SanDisk would mean big damage for Toshiba," said Yoshihisa
Toyosaki, Head, J-Star Inc.

Shares in Samsung closed up 1.2 percent after gaining more than three
percent, outperforming a 1.6 percent fall on the wider Seoul share market.

Stocks in Japan's Toshiba, which trails Samsung in the flash market but which
plans to nearly double its chip production capacity in partnership with SanDisk,
fell 4.6 percent to their lowest since November 2005.

In a brief statement, SanDisk said it "periodically has conversations with
multiple parties, including Samsung, regarding a variety of potential business
opportunities," but declined to comment further.

SanDisk shares have tumbled since mid-May, when they reached a recent peak
just above $33. The stock closed at $13.46 last week, valuing the company at
around $3.2 billion.

Online news provider said Samsung was interested in acquiring SanDisk, whose
shares have been mauled by a steep downturn in the memory market. It said
Samsung had retained JPMorgan as an adviser.

Samsung, which pays SanDisk 400 billion won ($353.8 million) a year in
licensing fees, is looking to reduce that cost through the acquisition, eDaily
reported.

Analysts also noted Samsung has been struggling with steep price drops in
NAND flash memory chips.

"Although SanDisk and Toshiba are partners, there are doubts as to whether
SanDisk will continue to invest (in their venture)," said James Song, an analyst
at Daewoo Sec. "So in the medium to long term, Samsung would be able to gain
more control over the flash market. By acquiring SanDisk, Samsung could also
reduce expenses related to royalties, and use SanDisk's marketing presence to
establish itself in the flash-based computer market," he added.

CW Chung, analyst at Lehman Brothers, noted Samsung would need to overcome
anti-trust scrutiny and issues relating to SanDisk's venture with Toshiba.

"As these issues are not yet resolved, we believe it is too soon to conclude
that Samsung can successfully acquire SanDisk. Furthermore, as the M&A news has
surfaced during the early stages of Samsung exploring the acquisition
possibility, we believe this may also weigh on the success of the deal," said
Chung.

SanDisk, widely known for its memory storage cards, was the subject of
speculation in August that computer storage drive maker Seagate Technology Inc
could be interested in buying all or part of it.

Source: CIOL