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Rambus, Fujitsu in a Licensing Deal

Zacks Equity Research

Rambus Inc. (RMBS) signed a patent licensing agreement with Fujitsu Semiconductor Ltd. for an undisclosed sum. Per the terms of the agreement, Fujitsu can use Rambus’ patented technology for its integrated circuit products for six years. Rambus, on the other hand, will receive royalty payments based on the shipment of these devices during the contract period.

Fujitsu is one of the leading players in the semiconductor market. Though Rambus’ financial benefits from the deal could not be gauged due to lack of sufficient information, the company’s growth prospects are quite evident.

Rambus’ innovative patented technologies are of great importance to chipmakers that tend to use them 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 per year, most of which are from semiconductor companies. Over the past few months, Rambus has licensed its technology to NVIDIA Corp. (NVDA), Broadcom Corp. (BRCM) and MediaTek Inc. for their respective integrated circuit products.

Apart from this, Rambus has also licensed patented technology for its advanced lighting products to Alton, Hampshire-based Fern Howard, a recognized producer of energy efficient lighting solutions.

Though Rambus’ technologies are getting popular, they often attract infringement lawsuits. The company had witnessed some victorious moments defeating tech big shot NVIDIA, but lost lawsuits against Micron Technology Inc. (MU), LSI Corp. (LSI) and STMicroelectronics (STM).

But recently, the company tasted success against Hynix Semiconductor. According to the ruling, Hynix was found guilty of infringing Rambus’ patents and is liable to pay all arrear royalties to the plaintiff.

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. Moreover, we expect synergies from the acquisition of privately-held memory technology provider Unity Semiconductor Corp. in February.

However, Rambus’ weak performance in the past few quarters and the bankruptcy of Elpida, one of its largest customers, keep us concerned.

Currently, Rambus has a Zacks #3 Rank, indicating a short-term Hold rating.

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