Intel expected to sell memory chip unit

Intel, the world?s biggest chipmaker, is reorganising its memory chip business, in a move being taken by Wall Street as a signal that it could soon sell or spin off the operation.

Shares in Intel rose more than 3 per cent amid the heaviest trading on Nasdaq on Monday as Wall Street took a corporate reorganisation by the world?s biggest chipmaker as a signal that it could soon sell or spin off its memory chip business.

Chuck Mulloy, an Intel spokesman, said that the move was intended ?to get greater alignment of resources and efficiency through the system.?

He said talk of a spin-off would be speculation and Intel would not comment. But sector analysts have suggested that Intel?s memory business ? which is running at an operating loss ? is a prime target for a sale or an initial public offering.

It is focused on Nor Flash memory chips. These have been losing out to the rival Nand Flash standard, which is dominated by Samsung of Korea.

The chips are used to supply the memory for storing pictures and music on digital cameras and mobile phones.

The reorganisation of the memory operations will be overseen by Brian Harrison, who was made head of the Flash Memory group when the new post was created last November.

Advanced Micro Devices, Intel?s microprocessor rival, spun off its Spansion flash memory joint venture with Fujitsu last year after it had dragged down financial performance.

Last month Paul Otellini, the chief executive of Intel, announced a 90-day review of the company?s operations which is expected to lead to restructuring. He also said there would be $1bn in cost savings this year.

Intel disappointed market observers with its first-quarter results and is expecting sales to fall by 3 per cent in 2006 ? after three years of double-digit growth and when the rest of the industry is performing strongly.

The company?s stock fell by more than 20 per cent during the first quarter.

Doug Freedman, an analyst at American Technology Research, said in a research report that Intel had separated Nor Flash production from its main manufacturing group, and that this was ?likely signalling the IPO or sale of the business?.

Mr Mulloy confirmed that a number of facilities had been taken out of the company?s main Technology Manufacturing group (TMG). These included Fab 18, which is a 90-nanometre Nor Flash production plant situated in Israel, a 200mm wafer plant in Ireland and D2, a development plant at Intel?s headquarters in Santa Clara.

Mr Mulloy said: ?We have the Number One position in Nor flash, we want to extend that and improve profitability.?