Micron Technology has a history of picking up factories at bargain prices when others flee the memory chip market, as well as keeping tight controls on headcount. Both seem to be at play in the purchase of Elpida Memory.

In the latest development, the Boise-based chip maker says it is trimming about 1,500 jobs, or less than 5% of its workforce. The cuts will not come from among the employees acquired along with Elpida.

Micron agreed to pay about $2.5 billion for the Japanese company, the successor to the memory businesses of NEC, Hitachi and Mitsubishi that had recently been operating in reorganization proceedings. (Because of fluctuations in the value of the yen, the price is currently closer to $2 billion).

Besides its own production capacity, Elpida had a big stake in Taiwan-based Rexchip Electronics. Micron also agreed to buy additional Rexchip shares, giving it a controlling stake in that company and 100% of its factory output. Together, the transactions boost Micron’s production capacity by about 45%, Micron says.

The Elpida purchase closed July 31, and Micron management followed up with an analyst meeting that provided more details about how the acquired operations will fit. Its message seems to be resonating with investors.

Micron’s shares on Tuesday jumped more than 8%. At $14.97, the stock is up 28% since May 31. 11.68

The company is widely remembered as the last U.S. maker of dynamic random access memories, or DRAMs, long a key component in personal computers. It was always a tough business, whipsawed by fierce competition and major price swings–and has gotten tougher lately as more consumer dollars go to mobile devices that consume fewer DRAMs.

The company is now also a major maker of NAND flash memory, the other storage chips that have become a faster-growing commodity as their use has expanded in smartphones and tablets.

While Micron has been particularly strong in DRAMs used in computers and networking devices, Elpida is strong in mobile DRAM, said Mark Newman, an analyst with Sanford C. Bernstein, in a research note Monday. “The Elpida deal looks like the steal of the century,” he wrote.

Besides the business synergy, investors may be encouraged by signs that the Elpida purchase signals that Micron now has all the production capacity it needs for a long time and could reduce expenditures there. The company signaled that point at its analyst meeting, as well the possibility that Micron and others in the industry will also slow the rate of spending on shrinking memory circuitry and start to consistently make money.

“The industry has consolidated and it has been painful,” said Mark Durcan, Micron’s CEO, during the analyst meeting, following years of which companies poured money into production capacity and got little in return.

But those days are gone, he said, in part because governments are no longer propping up memory makers. “This industry has fundamentally changed,” Durcan said.

A Micron spokesman said the job cuts, announced internally last week, were not related to the Elpida transaction. Rather, they were about the company’s continuing search for greater efficiency, and will include a mix of attrition, voluntary separation and reductions, he said.

“Micron is pursuing this action to ensure that its resources are efficiently and effectively aligned to best address customer needs and maintain the competiveness of the company,” the spokesman said.

By: DocMemory
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