Rambus, NVIDIA Shake Hands - Analyst Blog


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The prolonged legal battle between technology licensing company Rambus Inc. ( RMBS ) and graphics chip provider NVIDIA Corp. ( NVDA ) has finally come to an end. The ice melted with the two tech companies entering into a patent licensing deal for five years. Apart from this, the companies freed themselves of legal hassles through mutual settlement.

Per the deal, Rambus will offer NVDIA certain technologies useful for producing a broad range of memory chips. Though financial benefits on Rambus' behalf cannot be gauged due to insufficient details, the company's growth prospects can easily be understood. NVIDIA is one of the most sought-after players in the computing and gaming markets. Its association with the chip maker will bring in opportunities for more such deals.

The two companies were battling patent infringements since July 2008. Rambus filed a suit in the U.S. District Court alleging that NVIDIA products such as chipsets, graphics processors, media communication processors and multimedia applications processors infringed upon its patents, following which NVIDIA countersued.

Now that all the issues are settled, the two tech companies will be able to save legal costs while adding up to their net profits. Moreover, the joint effort could bring in more innovative technological solutions for end users.

We think that Rambus' efforts to resolve legal battles are quite encouraging. In December 2011, the company settled all outstanding claims with semiconductor company Broadcom Inc. ( BRCM ) and even clinched a 5-year licensing deal with the latter.

Things are back on track for Rambus since it lost a suit against Micron Technology Inc. ( MU ) and Hynix Semiconductor, a few months ago.

Though Rambus' growth prospects are imminent, we remain on the sidelines given the Fed's decision to declare three of its patents invalid. This could thwart its growth to quite an extent given its dependence on the three patents.

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

BROADCOM CORP-A ( BRCM ): Free Stock Analysis Report
MICRON TECH ( MU ): Free Stock Analysis Report
NVIDIA CORP ( NVDA ): Free Stock Analysis Report
RAMBUS INC ( RMBS ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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