(RMBS) Rambus and Broadcom in Licensing Deal

Rambus Inc. (RMBS) recently signed a patent licensing agreement with Broadcom Corp. (BRCM) for an undisclosed sum. Per the terms of the agreement, Broadcom can use Rambus’ patented DRAM memory controllers and serial links technology for its logic integrated circuit products for five years.

Rambus will receive royalty payments based on the shipment of these devices during the contract period. Apart from this deal, Rambus and Broadcom have settled all earlier claims regarding its patented innovations.

Broadcom is a fabless semiconductor company and its operations circle around the broadband, mobile and wireless, as well as infrastructure and networking verticals. As per a report published by the U.S. research firm Gartner in April 2011, Broadcom is now one of the top 10 semiconductor companies in the world.

We believe that association with Broadcom will support Rambus’ fundamentals for the upcoming quarters. And, success in Broadcom’s arena could fetch similar deals from the semiconductor industry.

In June, Rambus licensed its patented technologies to Freescale Semiconductor Inc. for five years.

In March, Toshiba Corp. renewed its patent licensing agreement with Rambus for another five years. Toshiba was Rambus’ first licensee and has helped the company to gain a strong foothold in Japan.

Though continuous licensing deal wins for Rambus is not new, anti-trust or patent infringement battles continue to make life difficult. Rambus faced a series of lawsuits from tech biggies, Nvidia Corp. (NVDA), Hewlett-Packard Co. (HPQ), Asus Computer International Inc., Samsung, Hynix Semiconductors Inc. and Micron Technology Inc. (MU) to name a few.

Rambus has won a favorable ruling from the U.S. International Trade Commission for lawsuits against Nvidia, H-P, Asus and Samsung. But it received an untoward ruling by a California jury on the long-drawn antitrust battle with Micron and Hynix in November that was surprising. The company’s shares lost significant value on the news of losing the case as the negative outcome blew investor sentiment.

Despite the current volatility in the share price, we consider that Rambus’ growth story remains intact. Rambus reported an interesting third quarter, easily surpassing the Zacks Consensus Estimate. The company also provided a positive guidance, although seemingly weak (because of seasonality).

Rambus holds a Zacks Rank #3, implying a short-term Hold recommendation.

BROADCOM CORP-A (BRCM): Free Stock Analysis Report

HEWLETT PACKARD (HPQ): 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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