Micron Technology Inc.?s big win in an antitrust lawsuit removed a cloud that has hung over the company for years. Shareholders responded by sending Micron?s stock soaring.
But the company still faces challenges: low prices for its memory chips, a fourth-quarter loss and weak demand for personal computers, a mainstay of its products.
Analysts had thought Rambus Inc.?s lawsuit in a San Francisco courtroom might require Micron to pay a billion dollars or more to Rambus, though not a $12 billion penalty it could have faced under California law if Rambus had won everything.
But Micron and its co-defendant, South-Korea based Hynix Semiconductor Inc., walked away Wednesday without any judgment against them.
?It?s obviously huge,? said Dave Petso, a Boise financial adviser who follows Micron.
What was the lawsuit about?
Rambus claimed that the two companies conspired a decade ago to lower certain chip prices and backed off a commitment to make dynamic random-access memory designed by Rambus.
Rambus, based in California, designs chips but does not manufacture them. It makes money by licensing its products.
Rambus also contended Micron and Hynix tried to interfere with its business relationship with Intel Corp. and drove it away from a collaboration on a Rambus-designed memory product in the 1990s.
Rambus said it would have made $3.95 billion in royalties without the alleged conspiracy. Triple damages could have run that tab up to nearly $12 billion.
The case was so complex that it required 15 weeks of proceedings and testimony, followed by eight weeks of jury deliberations. Jurors ultimately rejected both of Rambus? arguments by a 9-3 vote.
What does the victory mean for Micron?
?I am sure right now they are breathing a sigh of relief,? said Mike Howard, a semiconductor analyst for IHS iSuppli.
For Micron stockholders, the ruling put to rest concerns about potential liability, he added.
And the company, which still employs an estimated 5,000 people in Boise, can continue operating as usual.
Micron said in September it had not set aside cash to pay Rambus. The company has $2.1 billion in cash and short-term investments. Analysts say the decision frees Micron to use capital to buy a competitor, for instance. It might spend more on development of new products or repurchase stock.
?Micron in the last five years has been somewhat cautious in terms of how much capital it has and in terms of being able to expand,? said Kevin Jones, principal at Harmonic Advisors, an institutional portfolio manager in Boise.
But Micron might use its cash to ride out the latest downturn in the brutally cyclical memory market.
Some factories in Thailand that make hard drives for computers are underwater from flooding. That means Micron can?t sell dynamic random-access memory chips for them.
?DRAM is in a tough position for the next 12 months,? Howard said.
What do the companies involved say?
?The jury?s verdict validates our assertion that Micron acted in accordance with the law and consistent with its values of innovation and fair competition in the marketplace,? said Steve Appleton, Micron chairman and CEO.
O.C. Kwon, Hynix?s CEO, said the jury ?rejected Rambus? meritless claim that Hynix was to blame for the failure of Rambus?s proprietary RDRAM technology to become the standard for computer main memory.?
Rambus officials were disappointed.
?We do not agree with several rulings that affected how this case was presented to the jury, and we are reviewing our options for appeal,? said Harold Hughes, president and chief executive officer.
But the verdict swung so heavily in Micron?s favor that Rambus might not bother, Howard said.
Why did Micron?s stock go up?
Trading for Rambus and Micron stopped temporarily Wednesday after the court announced a forthcoming verdict.
When trading later resumed, Micron?s stock shot up 23 percent to $6.74 by day?s end. Rambus? plummeted 61 percent to $7.11.
Most investors had expected some kind of settlement, Howard said.
For Rambus, winning the lawsuit could have meant additional licensing agreements, Howard said. ?Without that, their forecast in revenues are going to be a lot lower.?
Bill Roberts: 377-6408.
Source: http://www.idahostatesman.com/2011/11/17/1881920/verdict-eases-microns-headache.html
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