Samsung Electronics Co. Ltd, the world’s largest maker of computer memory chips, has officially announced that it is not pursuing its $5.9 billion acquisition plan of the U.S. flash memory giant SanDisk Corporation (SNDK). A Samsung spokesperson stated in a filing to the Korea Exchange that there has been no progress on this issue since the company withdrew its offer as of October 22, 2008.

Samsung made a voluntary offer to buy SanDisk last year, but the latter it turned down, stating that the $26 per share offer made by Samsung was not satisfactory. The deal was later called off by Samsung as SanDisk went into losses and conditions worsened as a result of the global economic downturn.

However, the two companies did renew the agreement to cross license their semiconductor patent portfolios. In addition, the companies signed a flash memory supply agreement, under which Samsung will continue to make available to SanDisk a guaranteed portion of its flash memory production output for a license fee. The deal is expected to positively impact SanDisk’s License and Royalty revenue in the second half of 2009.

This merger deal would have been beneficial for both companies, as SanDisk owns a number of patents related to flash memory chips and Samsung pays a substantial amount annually as patent fees to the U.S. company. This apart, SanDisk could have utilized the technical expertise of Samsung and could have got the financial backing of the chip major.

SanDisk reported profits in the second quarter of 2009 buoyed by increased pricing, but provided a conservative guidance for the third quarter. Although SanDisk is showing signs of revival, we believe it will take some time for the company to achieve consistency in its operating performance.
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