Acquisition Action Starting Up in Flash Sector

Thanks largely to perennially hot-selling items such as iPhones, iPods and iTouches — and soon, the iPad — the flash market is really heating up. When you see dramas unfolding like the one going on between semiconductor maker Microchip Technology of Melville, N.Y. and flash chip maker Silicon Storage Technology of Sunnyvale, Calif., then you know this is a busy sector.

Microchip is trying to acquire SST, and the news is that March 8 it raised its offer for the second time in a month, topping an offer made by another interested company. Microchip’s offering $3.05 per share, which is 5 cents higher than its first offer. Still, it’s a 6 percent discount to Silicon Storage’s closing price of $3.25 on Friday, so therein lies the drama.

SST’s stock price dipped March 8 on the news. Why? “People don’t want the drama. We don’t like this whole back and forth motion, because at some point in time, both parties might drop off — there might not be a deal,” Harsh Kumar, an analyst at Morgan Keegan & Co., explained.

If Microchip is ultimately successful, it will own Silicon Storage’s flash chips, IP, and patent portfolio — all key ingredients for building advanced microcontrollers.

Silicon Storage’s chips are used in many products, including PCs, handheld devices, digital cameras and MP3 players. Microchip and its competitors use Silicon’s software.

We’ll keep a lookout on this story and see what finally happens.