Rambus Inc. (RMBS), a designer of computer memory chips, rose the most since November as investors bet the company will collect royalties because of a judge’s ruling in a U.S. chip-patent case with SK Hynix Inc. (000660)
Shares of the Sunnyvale, California-based company climbed 18 percent to $5.80 at the close of New York trading. The stock has slumped 23 percent this year.
“When the news came late Friday, you got rekindled interest in Rambus,” Hamed Khorsand , an analyst at BWS Financial in Woodland Hills, California, said in a telephone interview. “Where there was zero value, now investors have some hope.” Khorsand has a hold on Rambus and a target price of $5 a share.
The ruling by U.S. District Judge Ronald M. Whyte in San Jose, California, makes it probable that other companies that use Rambus’s technology will have to pay royalties, said Philippe Zera, an analyst at Algorithm Capital in Santa Clara, California.
“Hynix uses Rambus technology but doesn’t pay for it and this ruling increases the likelihood that they may strike some kind of deal and turn into a licenser,” Zera said in a telephone interview. “It further validates Rambus technology and could enhance the chance to settle other litigation and turn the infringers into licensers.”
Both Ichon, South Korea-based Hynix and Rambus welcomed the decision.
The ruling “substantially limits any royalties on Rambus’s patents,” SK Hynix said in a statement.
Rambus is hopeful the decision “will lead to putting this matter behind us completely and allow us to reach reasonable agreements,” the company’s general counsel, Thomas Lavelle, said in a statement.
“The ruling was expected, but it was a surprise for the short sellers and today we have a short squeeze,” Zera said.
Zera suspended coverage of Rambus in 2011, although said “a price target of $10 a share is possible.”
Rambus “is among a handful of companies where litigation has an enormous impact on the company fortunes,” Zera said. “They have great technology that’s essential for high definition television and wireless communication. Their technology is superior.”
Rambus “has been a sleeper since the price-fixing trial and the investor interest has dwindled away since that, and because other disappointments on the legal side,” Khorsand said.
In November, Rambus lost a $3.95 billion jury trial over its allegations that Micron Technology Inc. and Hynix Semiconductor Inc. conspired to prevent its memory chips from becoming an industry standard.
SK Telecom Co. completed acquiring a 21 percent stake in Hynix Semiconductor Inc. in February, becoming the biggest shareholder, according to data compiled by Bloomberg.
The U.S. Court of Appeals for the Federal Circuit in Washington upheld Whyte’s denial of Hynix’s bid to throw out a 2006 verdict finding the company infringed Rambus patents or grant a new trial. It vacated the financial damages judgment, throwing out a $397 million judgment against Hynix, because of the document spoliation.
Rambus’s cases against Hynix, and another related case against Boise, Idaho-based Micron (MU), are over the companies’ use of interfaces that are part of dynamic random access memory that acts as the main memory in computers. DRAM is built to industry standards and is interchangeable by product. Hynix and Micron claimed Rambus got rid of papers that would have proved Rambus misled the board that sets that standard.
In his ruling Sept. 21, Whyte decided to strike from the record in the case any evidence supporting a Rambus royalty that is “in excess of a reasonable and non-discriminatory” amount, according to the filing. Whyte ordered both companies to file their proposals on the rate amount to the court.
“There is a possibility that Rambus did not destroy any evidence that would have been beneficial to SK Hynix’s litigation position,” Whyte wrote in his decision. “However, because Rambus is the party that destroyed documents by the box and bag without keeping any record of what was destroyed, Rambus must suffer the consequences of that uncertainty.”
The case is Hynix Semiconductor Inc. v. Rambus Inc., 00-cv- 20905, U.S. District Court, Northern District of California (San Jose).
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