Intel is merging its flash-memory business with European rival STMicroelectronics. Intel and STMicro will form a new flash-manufacturing business.

Both Intel and STMicro have been looking for investment, as sales of flash memory are currently shaky. Flash memory is used in devices such as portable media players, mobile phones and digital cameras.

The two main types of flash memory are NAND and NOR. NAND chips are used to store pictures on digital cameras and music on MP3 players. Intel previously spun off its NAND flash memory unit into a joint venture with Micron Technology. Intel remains committed to that business.

NOR chips are used to store software and operating systems on more complex devices such as mobile phones. The new company will own its NOR memory assets, in addition to STMicro's NAND and NOR business.

Intel shares were up more than 1 percent on Nasdaq following the announcement. STMicroelectronics shares rose more than 5 percent. The private equity group Francisco Partners will pay $150m for a 6.3 percent stake in the new company.

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