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Hynix Shares Drop as US Jury Favors Rambus

Reuters
Wednesday, 26 Mar 2008 | 10:57 PM ET

Shares in Hynix Semiconductor fell early after a U.S. jury patent verdict that favored Rambus in a trial between the U.S. technology developer and chip manufacturers including Hynix.

Rambus said on Wednesday it won a coordinated trial against memory chipmakers including Hynix in South Korea, Micron Technologies of the United States and Taiwan's Nanya Technology. The jury found that Rambus did not violate antitrust laws or commit fraud in its attempt to protect memory chip patents.

Hynix shares were down 3.59 percent at 25,500 won in the morning session. Shares of smaller Taiwanese rival Nanya dropped 2.22 percent.

Micron said it planned to appeal against the verdict, while Hynix said it would file an appeal once the final court ruling is made. Nanya declined to comment.

"The ruling is only expected to have a short-term impact on Hynix shares," said James Song, an analyst at Daewoo Securities. "Hynix is expected to file an appeal and to have the award reduced," Song said, referring to a 2006 court judgment against Hynix that resulted in a $133.6 million award for Rambus. "Still, this cannot be good news as the direction of the legal case has been set."

Analysts have estimated Rambus could eventually collect royalties of anywhere from hundreds of millions to billions of dollars over the next decade. It is not yet clear when Rambus might receive any back royalties.

"Hynix shares had been on an uptrend recently and this is likely to have a one-day impact," said Cho Huyng-soo, an analyst at Samsung Securities.

But Cho pointed put that the impact of the $133 million award could be limited as Hynix made provisions of about $100 million in 2006 with the Rambus case in mind.

Hynix is grappling with difficult market conditions in the memory chip sector, which has been struggling with oversupply and collapsing prices in its flagship DRAM (dynamic random access memory), widely used in personal computers.

The sector's profitability problems have been compounded by steep price falls in NAND flash chips, used in portable electronics.

In August 2006, the U.S. Federal Trade Commission ruled separately that Rambus unlawfully monopolized markets for four memory chip technologies and distorted industry standards for dynamic random access memory (DRAM).

Hynix is expected to post large net and operating losses in the first and second quarter, with breakeven results seen in the third quarter, once the market regains its balance after capex cuts by cash-starved manufacturers.

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