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Elpida announces '$990m' IPO

Share sale to fund 'world's biggest fab' expansion plan

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Memory maker Elpida today formally announced its intention to IPO, having been granted permission to do so from the Tokyo Stock Exchange.

The share offering will take place 15 November and is set to raise around ¥108bn ($990m), based on an anticipated share price of ¥3400 ($31). Some 29.15m new shares will be issued, with a further 2.7m existing shares allocated if demand is there.

The move has been on the cards for some time. In June, company president Yukio Sakamoto said Elpida would consider a public offering to part-fund its fab expansion plan. The company hopes to grow its Hiroshima plant into the world's largest DRAM fab, at a cost of ¥500bn ($4.57bn) between now and 2007.

Much of the work on the plant will take place during a period in which the chip business is expected to decline slightly from its current double-figure growth rate. However, that means the plant will come on stream at a point when the market is expected to be moving back into a growth phase, putting Elpida - the company hopes - in a good position to capitalise upon rising demand.

Such a long-term view may prove too tenuous for investors, however, particularly given the bashing tech stocks and chip makers in particular have taken of late as the current industry-wide inventory correction impacts Q3 and Q4 sales.

Investors may also fear the effect of the US Department of Justice's investigation into alleged DRAM price-fixing, notes Gartner Dataquest analyst Andrew Norwood. Infineon has already coughed to the crime and agreed not only to pay a $160m fine but to aid the DoJ in any actions it takes against other memory vendors.

As the world's number five memory maker, as of Q2 2004. Elpida could well be a target of that investigation, and Norwood reckons it may face a fine of up to $205m if the DoJ finds it guilty.

According to market watcher Gartner Dataquest, Elpida took just 5.7 per cent of the world DRAM market, putting it in fifth place behind Samsung, Hynix, Micron and Infineon - a far cry, says Norwood, from the 1980s when Japanese memory makers dominated the market with a 78 per cent share, and Elpida's founders, NEC and Hitachi, were ranked in first and second place in the market. ®

Related stories

Infineon pleads guilty to memory price-fixing
Hynix overtakes Micron in world DRAM chart
Chip biz breaks quarterly fab spend record
Elpida boosts DRAM to SRAM speeds
Elpida, Micron ask Japan to take Hynix to task

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