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Rambus Inc. (RMBS - Snapshot Report) shares soared 3.85% in after-hours trading after it announced a two-way patent licensing agreement with European chip-making company STMicroelectronics (STM - Snapshot Report). The deal puts an end to the decade-long legal battle between the two companies and also keeps the doors open for further collaborations. Financial details of the deal were kept confidential.

Per the terms of the agreement, STMicro will be allowed to use Rambus’ patented Differential Power Analysis (DPA) countermeasures and CryptoFirewall core security technology across a wider range of products. The technologies will secure STMicro’s future multimedia chips.

On the other hand, Rambus will be allowed to use STMicro’s Fully-Depleted Silicon On Insulator (FD-SOI) process-technology design environment. With this, Rambus can deliver low-power-consuming chips even at lower nodes (28 nanometer or below).

Rambus clarified that it has settled all earlier claims regarding its patented innovations. Rambus and STMicro have been involved in several patent infringement lawsuits since Dec 2010.

Earlier this year, Rambus settled patent disputes with two chip-making companies, LSI Corp. and SK Hynix. It also signed new patent licensing agreements with the two companies. Similarly, Rambus settled lawsuits with NVIDIA Corp. (NVDA - Analyst Report), Broadcom Corp., MediaTek and Freescale last year. This indicates the importance of Rambus’ innovative technologies, the company’s ability to extend business ties and its intent to get rid of the legal entanglements.

Following the patent licensing agreements, Rambus narrowed its second quarter revenue guidance. Rambus now expects revenues in the range of $56.0–$58.0 million (previously $53.0-$58.0 million). Rambus will also reverse an accrual of $8.0 million in litigation costs related to the Hynix dispute, which will be included in its operating expenses.

We believe that Rambus’ growth story would remain intact, given its ability to settle legal claims, growing exposure in the LED arena and continuous deal wins.

Currently, Rambus has a Zacks Rank #3 (Hold).

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