Hyundai agrees to buy NCR Micro

Electronic News, Nov 14, 1994 by Walter Andrews

New York - In what it called the largest investment in America by a Korean company, ny, Hyundai Electronics America (HEA) last week agreed to buy the NCR Microelectronics Products Division (MPD) from AT&T for more than $300 million and help move the new parent company from high-volume memories to high-value ICs.

The addition of the MPD's $360 million sales mainly in ASICs and ASSPs would double Hyundai's annual semiconductor sales over 1993 to about $2 billion this year. Company executives said Hyundai is forecasting a 70 percent rise in its $1 billion 1993 world sales of DRAM and SRAM products to about $1.7 billion in 1994. About 2 percent of Hyundai's sales are in other products such as controller boards.

Hyundai will take time to digest the MPD acquisition and currently has nothing more on its purchase plate at this time, a company executive said, although "we will continue to look at appropriate opportunities as they arise."

The sale of MPD had been anticipated for the past two months after AT&T said it had retained the Morgan Stanley investment banking firm to search a buyer (EN, Sept. 5). Hyundai had earlier indicated an interest in acquiring an American company by putting in a friendly offer for Paradigm (EN, May 30).

Hyundai and AT&T declined to give any pacifics of the agreement other than to say in their joint statement "the purchase price was in excess of $300 million." The acquisition includes the RAID business, which recently introduced a family of third-generation controller boards and subsystems (EN, Oct. 31).

It also includes MPD patents and "certain trademarks," the companies said, adding that the transaction remains subject to certain regulatory approvals and is expected to be completed by year-end. in the statement, Y.H. Kim, CEO of HEA, said: "The acquisition of MPD is a strategic move to expand Hyundai Electronics' strong presence in the global semiconductor marketplace from a volume-driven memory business to the high-value added IC business,"

H. Gene Patterson, VP of AT&T Global Information Solutions in charge of MPD, said, "The acquisition is a good fit for our people, our products, our customers and our strategies. HEA offers MPD financial strength and a commitment to place its products and technology as cornerstones of its future growth. In particular, I am pleased that HEA has recognized the talents and achievements of the MPD work force by expressing its intention to hire alI current employees at their current positions and salaries and with a similar level of benefits."

MPD, which sells its products in the U.S., Europe and Asia, employs a total of 1,850 people in three locations: Ft. Collins and Colorado Springs, Col. and Wichita, Kan. Originally founded as an R&D arm of NCR Corp., MPD was acquired along with NCR by AT&T in 1991. NCR was later renamed AT&T Global Information Solutions.

AT&T has said it wanted to unload MPD because it wanted to focus on the mainstream computer-systems and services businesses and that less than 5 percent of MPD's output was used on company platforms with 95 percent being sold in the merchant market.

MPD will become a wholly-owned subsidiary of San Jose, Calif.-based HEA, which was formed in 1983 as a subsidiary of Hyundai Electronics Industries, the Ichon, Korea-based company that employs over 12,000 and anticipates total 1994 revenues of $2.5 billion.

Dennis McKenna, GM and VP of Hyundai America's Semiconductor Division, told Electronic News that Hyundai plans "to continue along the same course that the NCR management group has plotted and there's no change to that structure. I'm sure we'll be reviewing various new opportunities as we proceed but we'll stay the course because they've been very successful at what they've been doing. The growth has been very strong and we don't plan to change that path whatsoever."

The executive indicated Hyundai believe that with its worldwide marketing and manufacturing, it could increase the already formidable MPD growth rate. AT&T reports showed MPD's growth rate to have averaged 25 percent annually. MPD has indicated it was running at 100 percent of its fab capacity and Mr. McKenna said Hyundai was in a position to supplement this.

Asked if Hyundai might consider moving into the production of microprocessors, Mr. McKenna said: "There's nothing on the horizon at this point in time."

Dan Hutcheson, president of VLSI Research Inc., the San Jose, Calif. market research firm, saw the acquisition as an intelligent move by Hyundai (see latest VLSI Research semiconductor vendor rankings, page 80). "They don't want to get stuck like the Japanese in DRAMs and they don't want to go into MPUs and take on the heavy hitters like Intel."

MPD is a relatively small player in the mixed-signal market, he said, and doesn't dominate any market it is in. He looked for other Korean companies such as Samsung also to invest in American semiconductor companies.

Recently (EN, Aug. 1) Hyundai entered into a licensing and manufacturing agreement with Omega Micro of Sunnyvale, Calif. to co-develop Personal Computer Memory Card International Association (PCMIA) controllers.