Rambus, Hynix Settle Issues; Ink Deal

Zacks

Rambus Inc. (RMBS) shares soared 10.46% in after-hours trading after it announced a patent licensing agreement with South Korean memory chip-making company SK Hynix. The deal puts an end to the decade-long legal battle between the two.

Hynix specializes in providing dynamic random access memory (DRAM) chips and flash memory chips. Hynix chips are widely used by technology giants such as Apple Inc., ASUSTEK, IBM Corp., Dell Inc. and Hewlett-Packard Co. Innovative technology licensed from Rambus will help the company deliver advanced chips to be used in computer or electronic goods.

Per the terms of the agreement, Hynix will be allowed to use Rambus’ patented technology for its integrated circuit products for five years. As a royalty payment, Rambus will receive $12.0 million per quarter throughout the contract period, which comes to $240.0 million.

Rambus clarified that it has settled all earlier claims regarding its patented innovations. Rambus and Hynix have been involved in several patent infringement lawsuits since 2010.

Rambus’ innovative patented technologies are of great importance to chipmakers for making advanced chips to be used in computer or electronic goods. Hence, the company has been signing a number of multi-year licensing deals each year, primarily with semiconductor companies. Over the past few months, Rambus has licensed its technology to LSI Corp. (LSI), Fujitsu Semiconductor Ltd., NVIDIA Corp. (NVDA), Broadcom Corp. (BRCM) and MediaTek Inc. for their respective integrated circuit products.

Though Rambus’ technologies are getting popular, they often attract infringement lawsuits. The company had its share of success defeating tech big shot NVIDIA, but lost lawsuits against Micron Technology Inc. and STMicroelectronics.

We believe that Rambus’ growth story would remain intact, given its ability to settle legal claims, growing exposure in the LED arena and continuous deal wins.

Currently, Rambus has a Zacks Rank #3 (Hold).

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