Micron Loses on Falling Memory Prices

December 22, 2011, 2:41 AM EST By Ian King

(Updates with CEO’s comment in sixth paragraph.)

Dec. 21 (Bloomberg) -- Micron Technology Inc., the largest U.S. maker of computer-memory chips, reported its second consecutive quarterly loss as prices declined amid lackluster demand for personal computers.

The net loss was $187 million, or 19 cents a share, compared with net income of $155 million, or 15 cents, a year earlier, the Boise, Idaho-based company said in a statement today. Revenue in the first quarter ended Dec. 1 fell 7.2 percent to $2.09 billion. Analysts on average estimated a loss of 8 cents on sales of $2.12 billion, according to data compiled by Bloomberg.

The average price of Micron’s dynamic random access memory, or DRAM, which provides the main memory in PCs, fell 12 percent in the quarter and has slid another 20 percent so far in the current period, the company said. Floods in Thailand have left PC makers short of hard-disk drives, leading them to trim purchases of other components. That has resulted in a 10 percent to 15 percent drop in DRAM orders, Micron said.

“Business is not going gangbusters,” said Daniel Berenbaum, an analyst at MKM Partners LLC in New York, who recommends buying Micron shares. Berenbaum anticipates that the slowdown will force rival chipmakers to exit the industry or join forces. “Micron will be a survivor in the latest round of consolidation,” he said.

Micron shares were little changed in extended trading. Before the report, they fell 4.3 percent to $5.54 at the close in New York. The stock has dropped 31 percent this year.

‘Catalyst and Consolidator’

Micron, which has previously acquired the operations of other companies exiting the memory business, will consider further deals, Chief Executive Officer Steve Appleton said on a conference call with analysts.

“If there’s something there that makes sense, then we’re going to take a look,” he said. “I think we really have been the only catalyst and consolidator in the main DRAM field that’s been successful.”

While Micron’s DRAM selling price fell from the previous period, the company said it shipped 14 percent more chips. Inventory was little changed from the fiscal fourth quarter at $2.1 billion, and cash and short-term investment fell 11 percent to $1.92 billion after Micron spent $750 million on new plants and equipment.

Micron’s PC-maker customers will be able to ship 20 million more machines in the calendar first quarter compared with the fourth after an increase in hard-disk supply, Micron estimated.

Alone in U.S.

The company is the only remaining U.S.-based maker of DRAM after Asian manufacturers forced out the pioneers of the industry, including Intel Corp. and Texas Instruments Inc. Producers’ inability to match supply to demand in DRAM has hurt earnings as prices for the chips, which are traded on commodity exchanges in Asia, often fell below the cost of production.

Micron has reported an annual profit in only four of the past 10 calendar years. The company goes head-to-head with South Korea’s Samsung Electronics Co., the world’s second-largest chipmaker behind Intel.

Micron has lessened its dependence on DRAM by following Samsung and Toshiba Corp. into the market for Nand flash memory, chips that provide the storage in portable electronics such as Apple Inc.’s iPhone and iPad.

--Editors: Jillian Ward, Niamh Ring

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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Rambus Falls as Micron, Hynix Cases Sent Back to Lower Court

May 13, 2011, 4:37 PM EDT By Susan Decker and William McQuillen

(Updates with share trading in fifth paragraph.)

May 13 (Bloomberg) -- Rambus Inc. fell the most since 2009 after a U.S. appeals court agreed that the company destroyed documents relevant to patent infringement trials with Micron Technology Inc. and Hynix Semiconductor Inc. and sent the cases back to a lower court to determine appropriate sanctions.

A five-judge panel of the U.S. Court of Appeals for the Federal Circuit in Washington today vacated lower court rulings in the two cases, which centered on whether Sunnyvale, California-based Rambus should be allowed to enforce patents on computer-memory chips since it destroyed potential evidence.

The decision prolongs legal disputes that date back to 2000 for Rambus, a chip designer that has been suing companies that refuse to license its technology. The appeals court decision forces the judge in the Micron trial to reconsider the degree to which Rambus acted in bad faith and it throws out a $397 million judgment against Hynix so the court in that case can also revisit the document-destruction issue.

“Vacating awards or being convicted of spoliation is not anything anyone wants put out in the financial press,” said Jeff Schreiner, a Capstone Investments Inc. analyst in San Diego. “In the end, though, nothing has taken Rambus off the patent train express, nothing has derailed Rambus’s ability to collect on these patents.”

Rambus fell $3.44, or 18 percent, to $15.83 at 4:05 p.m. New York time in Nasdaq Stock Market trading, the biggest percentage drop at the close since January 2009. Schreiner has a $45 target and a “buy” rating on the shares and doesn’t own them. Micron fell 2.4 percent to $10.40.

‘Bad Faith’

“We are very disappointed with the decisions in these cases,” Thomas Lavelle, Rambus’s general counsel, said in an e- mailed statement. “We are hopeful when the district courts reconsider these decisions, they will find, as we believe, there was no bad faith and no prejudice.”

If the district court were to conclude again that there was “bad faith and prejudice,” a sanction against Rambus may be justified, the appeals court wrote in the Micron order. It didn’t say what the sanction would be, and said the judge has to consider whether lesser sanctions would be appropriate.

“Our view is that the district court truly believed that Rambus acted in bad faith and with sufficient prejudice,” Matt Powers, a lawyer at Weil, Gotshal & Manges LLP who represents Boise, Idaho-based Micron, said in a telephone interview. “That is the result that should happen and will happen.”

Representatives from Ichon, South Korea-based Hynix declined to immediately comment on the ruling.

Nvidia Case

Hynix is the world’s second-largest maker of computer- memory chips, trailing Samsung Electronics Co. Micron is the largest in the U.S.

Samsung, based in Suwon, South Korea, in January 2010 agreed to pay $900 million to settle all legal claims with Rambus, including a separate antitrust lawsuit.

The Micron and Hynix disputes are over the companies’ use of interfaces that are part of dynamic random access memory that acts as the main memory in computers. DRAM is built to industry standards and is interchangeable by product. Hynix and Micron claimed Rambus got rid of papers that would have proved Rambus misled the board that sets that standard.

Questions about the Rambus document-retention policy have dogged the company for years, and today’s ruling may help graphics-chips maker Nvidia Corp. in its appeal of a finding by the U.S. International Trade Commission that its products infringe Rambus patents. That case is on appeal before the Federal Circuit and involves different patents.

Micron Case

The cases ruled on today marked the first time the issue of document destruction has been put squarely before the appeals court in Washington, which specializes in patent law. The panel was trying to reconcile the two cases in which federal judges looked at the Rambus policy and came up with different results.

A judge in the Micron case ruled 12 Rambus patents unenforceable as punishment for document destruction, saying Rambus should have protected documents beginning in 1998, when litigation could be “reasonably foreseen.”

Trial Judge Sue Robinson in Wilmington, Delaware, didn’t explain why she felt Rambus acted in bad faith, the panel wrote in today’s decision to vacate the ruling.

“A district court must do more than state the conclusion of spoliation and note that the document destruction was intentional,” the panel wrote. “This court is unable to determine whether the district court applied the applicable exacting standard in making its factual determination that Rambus acted in bad faith.”

Needle in Haystack

The lower court will now need to determine whether the absence of the documents hurt Micron’s case. Taking into account motives and the degree of bad faith, the judge would need to explain the reasons for any sanctions.

Circuit Judge Arthur Gajarsa disagreed with the four-member majority. In the Micron case, Gajarsa said he would have upheld the sanctions of finding the patents unenforceable because Rambus “abused the privilege of owning a patent monopoly.”

“Instead of recognizing this abuse by Rambus, the majority searches to find a needle in the haystack because, in its collective superior judgment, Rambus’ conduct does not require taking away that privilege,” the judge said. “In vacating the sanctions award, the majority has called the firing squad to the ready, the squad cocking their guns and taking aim, but instead of shooting the appropriate and culpable party, the squad aimed at the district court’s proper determinations of fact.”

Hynix Case

In the Hynix case, the appeals court upheld U.S. Judge Ronald Whyte’s denial of a bid to throw out the verdict altogether or grant a new trial. It vacated the financial damages judgment because of the document spoliation.

Hynix had appealed after Whyte rejected arguments that the document destruction voided Rambus’s right to enforce the patents. The judge’s decision had allowed the trial to proceed, which resulted in the $397 million judgment.

Claims that Rambus has against Hynix and Micron over newer patents had been put on hold, awaiting today’s decision.

Rambus also has an antitrust lawsuit pending against the companies in a San Francisco court claiming $4.3 billion in damages, which is scheduled to go to trial June 7. Rambus alleges that Micron and Hynix artificially inflated the price of Rambus-designed DRAM chips to drive Rambus technology out of the computer-memory market.

The appeals are Micron Technology v. Rambus, 2009-1263, and Hynix Semiconductor v. Rambus, 2009-1299, U.S. Court of Appeals for the Federal Circuit (Washington). The lower-court cases are Micron Technology Inc. v. Rambus Inc., 00-cv-00792, U.S. District Court, District of Delaware (Wilmington) and Hynix Semiconductor Inc. v. Rambus Inc., 00-cv-20905, U.S. District Court, Northern District of California (San Jose).

--With assistance from Ian King and Joel Rosenblatt in San Francisco. Editors: Romaine Bostick, John Lear

-0- May/13/2011 20:14 GMT

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Bill McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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