Samsung to Pay Micron $275 Million in Cross-License Patent Deal

Samsung will pay Lexar Media parent Micron Technology $275 million “during the next couple of quarters” as part of a cross-license deal, Micron CEO Steve Appleton said in an earnings call last week. Under the 10-year agreement, Samsung agreed to pay Micron $200 million by this Tuesday, $40 million by Jan. 31, and the rest by March 31, Micron said in a filing at the SEC. The license was described by Micron as “a life-of-patents license for existing patents and applications, and a 10-year term license for all other patents."

Micron’s results for Q4 and the fiscal year ended Sept. 2 were stronger than the same periods a year earlier. Q4 revenue grew to $2.5 billion from $1.3 billion as it swung to a $342 million, or 32 cents per share, profit from a $100 million, 12 cents per share, loss in Q4 2009. Sales for the year grew to $8.5 billion from $4.8 billion and Micron swung to a $1.9 billion, $1.85 per share, profit from a $1.9 billion, $2.35 per share loss.

In NAND memory, Micron started “volume shipment” of its 25-nanometer technology for OEM and retail customers, Appleton said. The company saw a “softening” in demand late in Q4 in its notebook, desktop, and commodity DRAM businesses, he said. Its expectations for demand through the back half of this year from PC customers is weaker now than at the end of Q3, he said.

"It appears that some of the [weaker] demand is being driven by unstable consumer sentiment,” Appleton said. But he said, “Some of the softening in the desktop notebook space, I think, can also be attributed to the success of the tablet PC category.” The smartphone segment “is also growing, and I think having some impact there as well,” he said. But he said Q4 was the first full quarter in which Micron had an integrated Numonyx product portfolio. Micron recently bought semiconductor company Numonyx.

Micron’s business is shifting further away from “a commodity-based business to a broad set of solutions that serve markets” including computing, networking and mobile, “consumer electronics being a large part of that,” Appleton said. The percentage of Micron’s business from commodity DRAM is now less than 25 percent of its overall revenue, down from about 45 percent in the first half of the fiscal year and in “pretty stark contrast to previous cycles in the 90s and the early 2000s where Micron was virtually 100 percent leveraged to the PC,” he said. The company has “emerged from the difficult economic conditions over the past few years,” he said.

Revenue from sales of DRAM products was 14 percent lower in Q4 than Q3 this year “due to a 12 percent decrease in unit sales volume and a slight decrease in average selling prices,” the company said. Revenue from sales of NAND flash products was 9 percent lower in Q4 than Q3 “due to a 7 percent decrease in unit sales volume and a slight decrease in average selling prices,” it said. The company’s gross margin in the memory segment was 37 percent in Q4, down from 40 percent in Q3, “primarily due to the decreases in average selling prices,” it said.

Micron ended the fiscal year with cash and investments of $2.9 billion, it said. For all of fiscal 2010, the company invested about $950 million in capital and paid down its debt by $640 million, it said.