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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Barry Grossman who wrote (51774)	8/29/2000 3:47:35 PM
From: Barry Grossman	Read Replies (1) \| Respond to of 93625

thestreet.com Micron Antitrust Suit Doesn't Pummel Rambus' Stock By Thomas Lepri Staff Reporter 8/29/00 3:17 PM ET The muted reaction by Rambus' (RMBS:Nasdaq - news) stock to news that Micron Technology (MU:NYSE - news) is taking it to court suggests that investors may have finally settled in for a long road of litigation. Micron filed suit in U.S. District Court in Delaware Monday, charging that Mountain View, Calif.-based Rambus violates antitrust laws by seeking to exact royalty payments for DRAM memory technology that Rambus says is based on its patents. Rambus was off about 7%, or 5.88, at 78.13 in afternoon trading, a mild decline for the extremely volatile stock. The old confidence responsible for turning Rambus into one of the market's highest fliers remains. "I don't think it will be an issue in the long run," says Jian Wang, a trader at Morse Williams, which runs a number of mutual funds and is long Rambus. "If you want to have a high-performance PC, you need to have Rambus. We're still positive toward the stock." All optimism aside, the suit is significant in some ways. Micron is the first company to sue Rambus over the validity and enforceability of its patents. Rambus sued Hitachi (HIT:NYSE ADR - news) and Toshiba earlier this year, charging that they owed Rambus royalties on SDRAM and DDR memory, each of which competes with Rambus' proprietary RDRAM memory. Hitachi and Toshiba settled those suits by agreeing to pay Rambus royalties, an ominous precedent for Micron, a major supplier of SDRAM. Rambus also has a case pending against Siemens spinoff Infineon (IFX:NYSE ADR - news). "Micron has been antagonistic toward the whole Rambus notion since its inception," says Drew Peck, an analyst at SG Cowen who rates Rambus' stock a neutral. "At every opportunity, it has pointed out the deficiencies in the technology, the economic issues -- it's basically resisted the entire way." (SG Cowen has done no underwriting for Rambus or Micron.) When Intel (INTC:Nasdaq - news) invested $500 million in Micron in 1998, it did so under the assumption that Micron would produce DRAM supporting Rambus technology, whose cause Intel had taken up as its own after signing a development and license contract with Rambus in late 1996. "It was pretty clear that they were hoping that Micron would become a little less vocal about their objection to paying royalties to Rambus," Peck says. Many understood Intel's sale of its minority stake in Micron for more than $2 billion this summer as recognition the DRAM supplier wasn't going to play ball. This week's lawsuit makes it official. But while Micron's initiative has taken some observers by surprise, they have long been waiting for Micron and Rambus to square off. "My expectation was that Rambus would eventually have to sue Micron," says Morgan Stanley Dean Witter analyst Mark Edelstone, whose firm took Rambus public three years ago. "My assumption was that Micron would not license without a fight. Deciding to be the aggressor and sue Rambus is interesting, but it doesn't really mean a lot." (Edelstone rates Rambus a strong buy with a price target of 200.) That's because of the way patent law works. Once a patent has been issued, it's considered valid until proven invalid. And the burden of proof is on the would-be infringer, a role Micron would have assumed even if Rambus had initiated the suit. Edelstone thinks the resolution to Micron's suit, if it ever goes to court, will be far more interesting than how it got filed. Rambus has made it clear it won't license its technology to any company that challenges its patents in court and loses. "So if you're a company selling DRAM and you sue and lose," he says, "you won't be shipping DRAM anymore." (Morgan Stanley has no underwriting relationship with Micron, which it rates a strong buy.) Micron was lately down about 2%, or 1.50, to 87.81. --------------------------------------------------------------------------------