Talk of Viking Sale has Industry Buzzing
By ANDREW SIMONS
Orange County’s memory industry is abuzz with talk that Sanmina-SCI Corp. is in talks to buy Rancho Santa Margarita-based Viking Components Inc., the county’s third-largest memory products maker.
Officials at Viking and Sanmina, a San Jose-based contract electronics maker, declined to comment for this story.
Others in the tight-knit memory business are speculating that a deal is in the works.
“That’s what it seems,” said Manouch Moshayedi, chief executive of Santa Ana-based SimpleTech Inc., OC’s second-largest memory maker, on Sanmina’s reported interest in privately held Viking.
Industry sources said some Viking workers have been making calls seeking work at other memory companies, such as SimpleTech and Fountain Valley-based Kingston Technology Co., OC’s largest memory company.
Sanmina has restructured its OC operations recently.
As a part of its December purchase of Alabama’s SCI Systems Inc., Sanmina closed its 400-person Irvine plant and shifted most of those workers to a larger Costa Mesa plant.
Viking has been considering a number of strategic options for some time, as the market for its memory products has fallen.
Viking hired Los Angeles investment bank Murphy Noell Capital LLC last fall to explore options, including a possible sale to SimpleTech. But in the wake of Sept. 11, SimpleTech put plans for any potential buys on hold.
Viking then landed a credit line with part of Tyco International Ltd.’s financial services arm, CIT Business Credit.
The financing was to help Viking make a go of it alone, Viking founder and Chief Executive Glenn McCusker said at the time.
“A lot of companies came to look at us,” he said in an earlier interview. “What I found through this whole exercise is that we’re a strong company.”
Viking has cut costs. It subleased part of its Rancho Santa Margarita facility and has been looking at cheaper space in Aliso Viejo or Foothill Ranch. The company’s lease ended in March, and Viking officials since have been trying to rework the terms. The company also cut an undisclosed number of workers both locally and at an Ireland production facility.
Memory business insiders have long expected consolidation amid a sector downturn.
Like other memory companies, Viking finds itself grappling with slimming profits and a large inventory of memory boards, a result of falling sales of personal computers and networking gear.
Before the market hit bottom, McCusker said he was planning a possible initial public offering. McCusker granted 20 million stock options in January to workers so they would benefit from the company’s offering or a possible sale.
Viking, as with all memory companies, has benefited from the recent increase in prices for the most basic form of computer memory, dynamic random access memory. Prices have increased some 400% since last fall, according to market reports.
Memory chip sales should increase by 15% this year and will continue to grow until 2005, according to a report from Phoenix-based research firm Semico Research Corp.
Like the broader technology sector, the memory market goes through ups and downs, with periods of rapid growth followed by correction. As personal computer sales plunged in the past year amid the broader economic slowdown, computer memory companies have been forced to cut prices,and forsake profits,on memory modules, the silicon boards that house the memory chips.
