Micron Technology, bidding to compete with rival Samsung in offering a breadth of products, has agreed to buy fellow memory chip maker Numonyx in an all-stock transaction the companies value at $1.27 billion.

Micron, which has operations in Lehi, plans to issue 140 million shares to Numonyx shareholders Francisco Partners and chip makers Intel Corp. and STMicroelectronics NV. Numonyx was created by the three companies in 2008.

Micron will issue up to 10 million additional shares to Numonyx shareholders, depending on Micron's average share price for 20 trading days. The transaction is expected to close within three to six months pending regulatory approval.

Micron expects the transaction to add to its earnings beginning in 2011. When the deal is complete, Intel will own about 8 percent of Micron's outstanding shares.

The two companies have a joint venture called IM Flash Technologies in Lehi that produces flash memory chips, those that store data in music players, cameras and other digital devices. The deal is not expected to affect the IM plant that employs about 1,500 workers, said Micron spokesman Dan Francisco.

However, the transaction does vault Micron into the market for Nor-type flash chips, which go into mobile phones. CEO Steve Appleton is using the acquisition to lessen the company's dependence on personal-computer memory and step up competition with Samsung, which dominates the industry.

"Steve wants to make Micron like a Samsung, to be a one-stop shop for memory," said Daniel Amir, a San Francisco-based analyst for Lazard Capital Markets. He recommends buying the stock.

Micron shares lost 57 cents, or 6.28 percent, to finish at $8.51 in trading Wednesday. The shares had dropped 14 percent this year. Issuing 140 million shares would increase Micron's outstanding stock by about 16 percent.

Jim Handy, of Objective Analysis of Los Gatos, Calif., pointed out that Micron in the past has acquired companies at a low point in the market using depressed Micron stock.

"Although Intel, STmicroelectronics, and Francisco Partners will receive $1.27 billion worth of Micron stock at today's prices, this stock is quite likely to increase in value by the end of next year, leading to gains for the parent companies, while allowing Micron to perform the purchase at a relative bargain," Handy said in a research note.

Alan Niebel, a flash analyst with Web-Feet Research, said the deal will allow Micron to pursue business with mobile phone makers such as Nokia with a full complement of chips.

The deal helps Micron break away from a pack of fellow memory companies, Appleton said. Samsung is the only company in the memory business that can match Micron's array of products, he said.

"We think we will clearly be the second-largest maker of memory," Appleton said during a conference call. "Samsung's obviously still very strong, but we think we will start differentiating ourselves from the others."

Numonyx, based in Rolle, Switzerland, posted sales of $550 million in its most recent quarter, Appleton said. While the deal will dilute Micron's stock by about 15 percent, shareholders will get a revenue boost of about 30 percent, he said. Micron posted sales of $1.74 billion in its first quarter.

Samsung, based in Suwon, South Korea, is the second-biggest producer of chips, behind Intel. In addition to making flash chips, Micron and Samsung also make dynamic random access memory, or DRAM, the main memory used in PCs. James Chung, a spokesman for Samsung, declined to comment.