Microchip has granted an exclusive limited license to sell certain Serial NOR-Flash products belonging to its Silicon Storage Technology subsidiary ("SST") to Professional Computer Technology("PCT"). The license is limited to certain geographic regions and industry segments. This license allows PCT to sell Serial NOR-Flash products of SST from 512K to 64MB density in Taiwan, China, Hong Kong, and ASEAN (Singapore, Malaysia, Thailand, Indonesia, Vietnam and Philippines) and is limited to the industry segments of optical disc drives, set top boxes, electronic books, video games, digital displays, DVD player/recorder, notebook computers, netbooks, desktop computers, PC monitors, mass storage devices, printers/scanners/ copiers/faxes, PC-CAM, point of sale devices, graphics cards, servers/clients/workstations, and mobile phones. Certain undisclosed multi-national customers are excluded from this license. The combination of limited products, geographic regions and industry segments is hereafter called the "Licensed Market."
Under this license, PCT will be able to buy wafers for the Serial NOR-Flash products from SST's foundries in Taiwan and China and have the wafers probed, assembled and tested using SST's subcontractors in Taiwan and China. PCT will then sell these products to the Licensed Market under its own brand name. Any backlog from the Licensed Market that is on SST's books for the period beginning September 1, 2010 will be transferred to PCT.
"This deal continues our restructuring of the SST business by allowing Microchip to transfer an important component of SST's Serial NOR-Flash Memory business to PCT through the grant of an exclusive limited license. Microchip has received a license fee at closing and will receive a royalty on the sale of each device. This deal will reduce SST's Memory revenue and monetize it in the form of a license fee and ongoing royalties," said Steve Sanghi, President and CEO of Microchip.
Mr. Sanghi added, "With the sale of NAND drives and certain Memory products to Greenliant Systems Ltd. on May 21, 2010 and this exclusive limited license for a significant piece of Memory business to PCT, Microchip is well on its way to restructuring its SST subsidiary into a business model that will complement the Microchip operating model." Mr. Sanghi concluded, "This transaction isn't expected to impact our previous financial guidance for continuing operations. The results from the business unit that is being transferred through this license to PCT have been classified as discontinued operations and will be reported as such for the June and September 2010 quarters."