New hope for US memory maker Spansion after big Samsung settlement

Bringing to a quiet end a case where one of America's brightest hopes for competing in microprocessors had vowed to go down swinging, Spansion -- the producer of flash memory born from an AMD spinoff -- settled its case brought last November against global NAND flash powerhouse Samsung. Spansion will receive a one-time payment of $70 million in cash, and the two companies have agreed to share each others' patent portfolios.

The news is exactly what Spansion needs right now to survive, having filing for bankruptcy just last month. A few weeks ago, the company reported fiscal first quarter revenue of about $400 million, which isn't small change by any means. But that's a 15% annual drop, and the flash memory business has notoriously thin margins.

One of the restructuring options on the table for Spansion -- at least as of a few weeks ago -- was the sale of some or even all of its manufacturing facilities, retaining only its IP portfolio and maintaining an "asset light" strategy. But if that's the type of division Spansion wanted to become in the first place, AMD might never have sold it off.

In a press report this afternoon, Jim Handy of Objective Analysis said he believed the settlement was good news for Samsung as well. The crown jewel of Spansion's portfolio is a charge trapping technology that enables a single bit of memory to hold three possible states instead of just two. Now, that one-time payment, Handy said, may end up reducing Samsung's allotment for royalty payments over time.

"The settlement is probably...a really good deal for Samsung's semiconductor business, since they will only make a one-time payment for Spansion's key charge trapping technology instead of an ongoing royalty stream which would most likely have been a percentage of sales, payments that could rise to considerably more than this one-time payment," Handy wrote. "Meanwhile, Samsung's cell phone group, who has awarded Spansion with vendor awards for a number of years, can feel more comfortable about the future of a valued supplier."

As for Spansion, Handy said last November he thought the company would be forced to explore a merger, perhaps with a company like Broadcom with the muscle to compete against Samsung. But this agreement -- which Handy now concedes was "nervy" though fruitful for Spansion -- may have delayed or averted such an outcome.

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