A $5.85 billion bid by Samsung Electronics Co. to take over SanDisk Corp., a wounded competitor that also serves as a partner, reflects the turbulence in the market for flash memory, a key ingredient in digital cameras, music players and other devices.
For now Samsung has been rebuffed in its attempt to scoop up SanDisk for $26 per share. SanDisk called the offer an “opportunistic attempt” to take advantage of its slumping stock price. But SanDisk left open the possibility for further negotiations if the pot were sweetened, and SanDisk shares jumped $6.19, 41 percent, to $21.23 on Wednesday.
The memory market is prone to severe boom-and-bust cycles, like the rest of the semiconductor industry, and is suffering now from a prolonged funk caused by a glut of chips and plunging prices, even though demand is high.
Those pressures have whacked companies like Milpitas, California-based SanDisk, which owns more than a third of the U.S. market for flash memory cards.
SanDisk’s profit has plunged 43 percent over the past two years, to $218 million in 2007, while its stock has tumbled from more than $60 per share in 2006 to less than $15 per share before word of the acquisition talks leaked this month. That decline vaporized $9 billion in shareholder wealth — and cracked an opening for South Korea-based Samsung.
Among other things, Samsung is the world’s second-biggest semiconductor company, behind Intel Corp., and the biggest maker of a type of memory chip called NAND flash. In SanDisk, Samsung sees the chance to pick up valuable patents on current and future memory technologies and absorb a well-known company with steadily improving sales.
SanDisk had $3.9 billion in revenue last year, a nearly 20 percent improvement over 2006. Although its profits and market value have suffered, the company still enjoys rising demand for digital devices that…