Samsung in better position to settle with Rambus

SAN FRANCISCO (MarketWatch) -- Rambus Inc. investors are trying to figure out what happens next, now that the chip designer has signed a sweeping settlement with Samsung Electronics Co. to resolve all the litigation between the two firms.
After the market closed Monday, Rambus (RMBS) and Samsung (SSNGY) announced a settlement of all their outstanding claims, worth at least $700 million to Rambus over the next five years. Samsung will also invest $200 million in the smaller chip designer, which has been embroiled in litigation for years over its attempts to seek royalties from the big memory chips firms for its designs. See Rambus news here.
Even as Rambus shares jumped in after-hours trading, some investors groused about the settlement on message boards. Some are a bit nervous now about the outcome of Rambus's pending trial against the two remaining defendants -- memory chip firms Micron Technology Inc. (MU) and Hynix Semiconductor Inc. (HXSCF).
Samsung, it appears, was the big money-bags of the memory giants sued by Rambus in 2004, in a suit alleging price fixing and colluding to block the company from succeeding in the memory-chip market. That case was set to go to trial last week, but it was delayed until Thursday. Micron is seeking a two-month continuance because one of its attorneys is ill. See column on Rambus trial here.
Rambus still has other cases ongoing, but this trial, referred to by some investors as the "Cartel Trial," has gotten a lot of attention because the company is seeking $4 billion in damages, which analysts said could be trebled under the law. Jeff Schreiner, an analyst with CapStone Investments, warned earlier this month that both Hynix and Micron could face potential bankruptcy if they lose this case.
"Hypothetically, if one defendant settled prior to trial, the remaining two defendants would still face [a] potential trebled damage award of about $12 billion," he wrote in a prescient note Jan. 4. "In our opinion, certain defendants could face bankruptcy if they remain in antitrust proceedings."
He added, "If Samsung were to settle prior to the trial, the entire damage award could be passed solely to Hynix/Micron."
Samsung has about $7.4 billion in short-term cash, according to its most recent financial statement, while Micron has $1.5 billion and Hynix, with a large debt load, has about $1.1 billion. Clearly, Samsung was in a better financial position to come up with a big settlement that would satisfy the long-embattled Rambus. So far, Micron and Hynix are rolling the dice and hoping for a victory on their end or even a mistrial.
Rambus investors who are confident in its case seem to have a reason to be concerned if Rambus wins at trial. You can't squeeze blood from a turnip.
-- Therese Poletti