Several analysts drafted bullish reports Friday on Rambus,
confident the controversial memory chip designer will win a string of
high-profile lawsuits in Europe.
If Rambus wins the patent infringement cases in Germany and France, it
stands to reap as much as $1 billion in royalty payments, retroactive
the past decade. Courtroom victories could also dramatically increase
Rambus' market share by shutting out competitors in certain regions and
Though it was a relatively obscure company two years ago, Mountain
Calif.-based Rambus has emerged one of the most litigious and
semiconductor companies on the market today.
In 1990, the company filed a series of patents for a new type of
computer memory, Rambus dynamic random access memory (RDRAM). A few
manufacturers had adopted its technology early in the decade, but the
company dramatically increased its scope and client base in 1996, when
announced it would pair future microprocessors with RDRAM.
But RDRAM turned out to be expensive and complex to make. Memory
manufacturers recoiled at having to pay the company royalties. Even
CEO Craig Barrett has complained about the royalty structure, calling
least some of the company's focus on Rambus "a mistake."
Despite the complaints, Rambus has aggressively pursued companies that
comply with its fee structure.
In September, Rambus filed four
lawsuits: two separate suits in Germany against Korean chipmaker Hyundai
U.S. memory maker Micron Technology and two similar suits in France.
that, Rambus also filed a complaint with the U.S. International Trade
Commission to bar the importation of certain Hyundai memory chips into
United States. Both Micron and Hyundai filed lawsuits against Rambus in
courts in August.
The lawsuits have revolved around patents filed by the company starting
April 1990. Those patents eventually formed the basis for RDRAM.
among other memory manufacturers, has taken out a license to
Rambus says the patents give it a legitimate claim to royalty
the production of RDRAM as well as synchronous dynamic random access
RAM), the standard form of memory found in computers today. Rambus
claims it has control over DDR DRAM, a cheaper form of high-speed
that is winning favor over RDRAM.
In many instances, memory manufacturers likely were unaware that any
claim existed until after the fact, Rambus executives have
Nonetheless, analysts say Rambus has a good chance of winning the
collecting retroactive royalties for the past decade that could exceed
Rambus executives told analysts recently that the company will go to
in Germany against Infineon on Dec. 22, and it will face Hyundai and
on Feb. 16. Another trial with Micron in Italy will likely take place
Rambus is also pursuing 11 patent infringement cases in the United
the company's prime market for RDRAM and a jurisdiction where Rambus
more than 100 patents issued. But the slow-moving U.S. legal system
unlikely the American cases will be settled soon, analysts said,
European trials are already set and will likely result in swift
The prospect of a European courtroom victory makes analysts bullish on
Rambus. UBS Warburg and Morgan Stanley Dean Whitter reiterated "strong buy"
ratings on Friday, while Chase Hambrecht & Quist
initiated coverage with a "buy"
Rambus stock soared 15.47 percent in midday trading Friday, hitting
Although the stock is down 21.92 percent since Monday, it has shot up
percent since the beginning of the year.
Meanwhile, UBS Warburg analysts Gregory Mischou and Kelley Yukich
situation potentially "bleak" for Infineon, Hyundai and Micron.
"Decision's in Rambus' favor in these venues would result in an
preventing the opposing party from manufacturing or selling infringing
products without a license in the subject country. We believe this
would be serious for Micron in particular, in light of its wafer
(fabrication plant) in Avezzano, Italy," the analysts wrote in a
note issued Friday.
"Rambus management pointed out that as these companies pursue their
and/or defenses without paying royalties to Rambus, they face the risk
being prevented by legal injunctions from participating in important
markets unless they are willing to pay license fees once the court
are resolved," Mischou and Yukich wrote. "We also believe that by
for a legal decision, these players risk being put at a disadvantage in
negotiating royalty rates, relative to their competitors who have
signed license agreements."