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Merrill upgrade boosts Micron
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December 3, 2001: 1:41 p.m. ET
Analyst says potential deal with Hynix could help capacity problems.
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NEW YORK (CNN/Money) - Computer memory-chip maker Micron Technology got a boost Monday from Merrill Lynch, which upgraded its rating on the company's shares on news of a possible merger with rival Hynix Semiconductor.
Such an alliance would help alleviate some of the supply glut that has been weighing on Micron (MU: up $1.39 to $28.55, Research, Estimates) and the memory chip business as a whole, according to Merrill analyst Joe Osha, who upgraded his mid-term rating on Micron's shares to "Buy" from "Accumulate."
By Osha's count, Hynix, which is based in South Korea, accounts for roughly 17 percent of global dynamic random access memory, or DRAM, output. He said any tie-up or asset sale between Hynix and another company would likely result in a significant reduction of Hynix's output, which would ultimately alleviate some of the pricing pressure in the industry.
And that in turn, Osha said, would prove beneficial to Micron's shares.
"I think a potential deal with Hynix that would result in some capacity coming off line is a good catalyst for the stock," Osha told CNNfn's Market Call. (179K WAV) or (179K AIFF)
News of a potential deal was first reported last week by the Electronic Buyers' News, an electronics industry trade paper.
On Monday, the companies confirmed that they were discussing some sort of an alliance, which could include a merger. Hynix is the second largest DRAM supplier, behind Samsung Electronics, while Micron ranks third.
The combined entity would surpass Samsung as the market leader.
Over the past year, the semiconductor industry has been hurt by an excess of unsold inventory, with the DRAM segment being among one of the hardest hit.
Micron and Hynix, unlike the larger and more diversified Samsung, have suffered huge quarterly losses recently.
The downturn was nearly fatal for the heavily indebted Hynix, which had to be rescued from its creditors. Last month, auditor Arthur Andersen estimated Hynix's liquidation value at about $2.8 billion. 
-- Reuters contributed to this report
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