Seoul - South Korea's Samsung Electronics Co said Wednesday that it was scrapping its 5.85-billion-dollar bid for US memory card maker SanDisk Corp, citing its third-quarter loss and a partnership with Samsung's rival Toshiba Corp.

Lee Yoon Woo, Samsung's chief executive officer, said in a letter to SanDisk's board that the Milpitas, California-based company faced "uncertain earnings prospects," which could worsen with the downturn in the global economy and the outlook for the chip industry.

He added that the two companies had been in negotiations for half a year without making progress on a deal.

SanDisk had rejected Samsung's 26-dollar-per-share offer in mid-September as "inadequate," saying it "significantly undervalues SanDisk given the long-term prospects of its business."

Analysts did not rule out another attempt by Samsung, the world's second-largest chipmaker, to take over SanDisk.

A merger with SanDisk, the inventor and world's largest supplier of flash storage cards, would improve the Suwon, South Korea-based company's leading position against Japan's Toshiba in the flash memory chip arena and save it licensing costs of 350 million dollars per year that it must now pay to use the flash-memory technology patented by the US firm. It would be the largest acquisition ever made by Samsung.

Flash memory chips are used to store music and pictures on digital devices such as cameras and MP3 players.

SanDisk has been struggling this year as an oversupply of flash memory chips on the market has driven down prices, leading to losses for the company and a 56-per-cent drop in its share price.

SanDisk has has a chip-making venture with Toshiba. (dpa)