Intel takes 6 percent stake in Micron Technology

Intel Corp. is taking out a 6 percent stake worth $500 million in memory-maker Micron Technology Inc.

Intel (Nasdaq:INTC) said today that the Micron (NYSE:MU) investment will help fuel development of a special type of memory. Intel has been pushing for new systems to use a new expandable memory known as Direct Rambus Dynamic RAM (DRDRAM). The memory was developed by Rambus Inc. with input from Intel, and is seen as the successor to 100MHz synchronous DRAM.

A strategic investment
Micron expects to have DRDRAM products shipping by the third quarter of next year.

"Our goal is ... ensuring an adequate supply of memory components, particularly Direct RDRAM. This is a significant strategic investment that supports our microprocessor roadmap into 2000 and beyond," Intel CEO Craig Barrett said in a release. The news prompted the investment firm Gruntal & Co., based in New York, to raise its rating and price target on Micron's stock.

Rumors about the deal surfaced last month, but Intel remained mum.

An oversupply of memory?
Micron could certainly use the cash. Although the company reported a smaller-than-expected loss for the fourth quarter last month, things still looked grim. The oversupply in memory has driven down prices, while low demand drove down revenues.

"Obviously all of us know that the memory guys right now, well, it's not the best of times. They're in a situation where many of them are having to trim back R&D efforts. And [this technology is] the kind of thing where the heavy lifting needs to be done now," said Intel spokesman Howard High.

"The investment today obviously is a vote of confidence with Micron. It gives them funds to pursue development and supply of Direct RDRAM, and for the industry it signals that we are committed to bringing these high performance technologies to the marketplace."