Citigroup (NYSE:C) Launches Coverage on Spansion (NYSE:CODE)

Citing renewed interest in the NOR flash chip segment, Citigroup has initiated coverage on Spansion (NYSE:CODE).

Citigroup’s chip analyst Glen Yeung said, “We suspect that investors will not find CODE shares compelling when presented with alternatives in the chip sector”

Even so, if Spansion would be able to generate royalties from Elpida using its "mirror bit” technology, and sales of NAND from using Elpida’s production facilities, which would lower costs, that could change the outlook for the company.

Yeung said he believes Spansion could regain about 14 points over the next two years, as it recovers from the stigma its bankruptcy had given them.

The problem for Spansion is the NOR market itself, which is expected to drop by about 3 percent annually through 2013, according to Yeung, which could pressure Spansion even if they gain market share in that environment.

Citigroup has a "Hold" rating on Spansion, which was trading at $20.26, up $0.11, or 0.55 percent, as of 2:03 PM EST. They have a price target of $23.50 on them.