Elpida to raise $990 million in refocusing effort

Chip-maker Elpida is to raise over $990 million in an effort to concentrate on producing silicon for smartphones and tablets.

The company, which is best known for its production of memory products like DRAM, is refocusing its efforts on areas that it sees as being significantly more profitable, but it needs to raise close to a billion dollars to fund such a major change in direction.

To generate the cash, Elpida will dilute existing shares to create new ones, a move which won't go down well with current shareholders. It will also add convertible bonds to bring in more money, reports Reuters.

The DRAM market, in which Elpida is a dominant player, has been losing money recently, with iSuppli figures showing a drop in revenue from $10.8 billion in 2010 to $8.2 billion in the first quarter of this year.

This lack of demand has led to Elpida making a loss of $65 million in the first quarter of the year, compared to a profit of $470 million a year earlier.

It's therefore not surprising that Elpida decided to refocus on the smartphone and tablet markets, which have been booming over the past 12 months.

Elpida will spend $310 million of the new funds on a new factory in Hiroshima, which is expected to open in 2013. It will use some of the other money to pay off its debt.

Rivals like Samsung and Hynix are storming ahead in the smartphone and tablet chip markets, so it won't be an easy battle for Elpida, but it's certainly a better bet than the ailing DRAM sector.

404

Sorry! Page not found.

The article you requested has either been moved or removed from the site.