December 16, 2005 10:42 AM PST

Spansion gets lukewarm response to IPO

Spansion, the flash memory company created by Advanced Micro Devices and Fujitsu, held its initial public offering Friday, and so far, it hasn't been a Google-like event.

The company sold 42.2 million shares of class A stock for $12 in its IPO and shares began to trade on the Nasdaq exchange. Investors, however, haven't driven up the stock much. Spansion's shares have traded at just below $11 and as high as $14. Around 10 a.m. PST, the stock, traded under the SPSN ticker, sold for $13.10. In November, the company had said it would offer its stock for $16 to $18 share.

Spansion specializes in NOR flash memory chips, which are used to store code and applications on cell phones. Network equipment manufacturers consume quite a bit of NOR as well.

Intel leads the NOR market, followed by Spansion. Although NOR flash shipments have been growing, the market is extremely volatile. Spansion had been gaining market share and turning an operating profit in the first part of 2004, but Intel's price cutting and Spansion's product delays spilled into losses.

AMD announced plans to spin off Spansion during the downturn, a move that many analysts questioned at the time.

The company's financials have underscored the terror ride that the flash memory market has become. In 2003, Spansion's revenue was $962 million and net income was $21 million. In 2004, revenue more than doubled to $2.3 billion, but the company reported a net loss of $19.7 million.

For the first nine months of 2005, revenue was $1.4 billion, but net losses had ballooned to $256.6 million.

Further, NOR flash chip makers now face competitive pressures from manufacturers of NAND flash. NAND, which goes in MP3 players and other consumer electronics devices, lacks some features of NOR, but can pack far more into a smaller space. The market is also growing far more rapidly. Last month, Intel followed through with plans to ally with Micron Technology to produce NAND.

 

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