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Rambus, Nanya Ink License Deal

Zacks Equity Research

Rambus Inc. (RMBS) recently signed a 5-year patent licensing agreement with Nanya Technology Corporation for an undisclosed sum. Per the agreement, Nanya can use Rambus’ patented technology for its DRAM products through the second quarter of fiscal 2018. The deal also settles earlier claims regarding its patented innovations.

Taiwanese DRAM maker, Nanya is one of the leading providers of memory solutions. It is now one of the top four DRAM companies in the world, the other vendors being Samsung, SK Hynix and Micron Technology Inc. (MU).  Leveraging Rambus’ patent portfolio, Nanya will bring in more innovative technological solutions for end users.

Licensing agreements are a recurring revenue source for Rambus, the result of successful monetizing of its patents. In the fourth quarter of fiscal 2013, the company reported customer licensing income (including patent royalties received and gain from settlements) of $73.8 million compared with $61.6 million in the year-ago quarter. The year-over-year growth was mainly due to the new license agreements signed with SK Hynix, Micron Technology, ST Microelectronics and LSI Corporation.

Rambus’ patented technologies are of great importance to chipmakers for manufacturing advanced chips used in computers and electronic goods. Rambus has already licensed its technology to Fujitsu Semiconductor Ltd., NVIDIA Corp. (NVDA), Broadcom Corp. (BRCM), Micron Technology and MediaTek Inc. for their respective integrated circuit products.

Most recently, Rambus signed a 10-year licensing agreement with Samsung Electronics. Per the agreement, Samsung will use Rambus’ integrated chip technologies and security technologies in its devices such as tablets, smartphones and set-top boxes though 2023.

Moreover, the company expects to introduce several innovative products and services in 2014 that would support its revenue growth, going forward.

Apart from these, we are encouraged by Rambus’ decision to divest its Display patent assets to Acacia Research Corp. in order to focus wholly on the fast-growing Lighting space.

At the same time, competition from Semiconductor Manufacturing International and Advanced Micro Devices, and oversupply in the semiconductor market remain concerns.

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

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