Gores to Buy Micron’s PC Unit
Los Angeles buyout firm Gores Technology Group has agreed to acquire the money-losing personal computer business of Micron Electronics Inc. in a deal to be announced as early as Monday.
The two companies have signed a letter of intent but had not finalized terms by Friday, according to people familiar with the negotiations.
No price was disclosed for the acquisition, but analysts expect it probably will fall in the bargain-basement range.
“They shopped it around for a long time,” said PC analyst Roger Kay of industry tracker International Data Corp. in Framingham, Mass. “Based on market behavior, that would imply a pretty small sales price.”
Micron Electronics, based in Nampa, Idaho, said a week ago that it had agreed to sell the division to an unnamed private investment firm to focus on its far smaller Web site hosting business.
Micron Vice President Barbara Gibson declined to comment Friday on the buyer or the terms. Gores referred questions to outside spokesman Terry Fahn, who said no deal had been reached.
But sources said negotiations were close to finishing with only fine points left to negotiate.
The market for personal computers began slumping badly last year, and all of the major manufacturers have announced disappointing earnings or projections. Compaq, Dell, Hewlett-Packard and Gateway are all cutting jobs.
Micron, the 10th-biggest PC maker, had less than 2% of the U.S. market in 2000, according to International Data. It sold about $1.2 billion worth of PCs last year, down from $1.4 billion in 1998.
The company is majority-owned by Micron Technology Inc. of Boise, Idaho, which makes memory chips and other components.
Micron Electronics concentrated on more powerful computers than those of its rivals, but it was caught by the increasing might of garden-variety machines, and it didn’t get the volume discounts of its bigger competitors.
“The niche they had carved out in early years was really the tech heads, and that became a very tiny piece of the market,” Gibson said.
The company’s shares have fallen from $25.38 in 1997 to $1.68 on Friday, off 6 cents on Nasdaq. During the day, the stock touched $1.59, the lowest point since the company’s formation in 1995.
Last week, the PC unit laid off 400 of its 2,000 employees.
Micron’s factory is a valuable asset but has been underused. Analyst Kay said the new owner should either sell it and contract out its manufacturing, or take in contract work and assemble products for other manufacturers.
Micron also enjoys good relations with the federal government, which is its largest customer.
Gores has a lower profile than other buyout firms, but it attracted some attention last year after buying Learning Co. from toy maker Mattel Inc., which had disastrously overpaid for the software outfit.
Gores laid off 300 of Learning Co.’s 1,500 employees and said this month that the unit had become profitable.
Founded in 1992, Gores targets technology companies with revenue of $10 million to $1 billion, especially units that are being cast off from major corporations. Gores has acquired 30 companies for about $500 million, according to its Web site.
