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Rambus Rides Talk That Others Fixed Prices

Reports of an admission to DRAM price-fixing by competitors boost Rambus' legal position.

Updated from 2:18 p.m. EST

Rambus

(RMBS) - Get Rambus Inc. Report

shares shot up Tuesday as investors embraced a report that a major semiconductor manufacturer is about to cop to price-fixing in the random access memory market.

Rambus shares closed in regular trading at $29.77, up $3.27, or 12.3%.

Bloomberg

earlier had reported that

Micron Technology

(MU) - Get Micron Technology, Inc. Report

is on the verge of admitting it took part in a price-fixing scheme with three other semiconductor makers.

"If Micron is settling something with the

Department of Justice to avoid criminal penalties regarding price-fixing, the extrapolation would be that the DRAM manufacturers did collude," summed up Erach Desai, an analyst for American Technology Research. "That would perhaps make a case for Rambus to bring anticompetitive charges against the DRAM manufacturers, and they could possibly claim treble damages."

Bottom line: An admission of wrongdoing from Micron would be advantageous for Rambus, which has been trying to get Micron and other major DRAM manufacturers to pay royalties.

Any deal between Micron and the government would also speed up the outcome of cases now pending in the courts. "If the DOJ settlement were not happening, some kind of court decision with Micron would probably be a year or a year and a half away," pointed out Desai. "But if Micron is working something out with the DOJ, it may be that they're coming to the table with Rambus earlier than the market was anticipating."

Micron shares closed Tuesday at $13.73, down 22 cents, or 1.58%.

Micron declined to comment on the report that it might be about to admit to price-fixing. Spokesperson Dave Parker said only that the company "has fully and actively cooperated" with a Justice Department investigation launched in June 2002 and that it will continue to do so. The firm "can't comment on matters under investigation," he added.

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At the time the investigation was launched, Micron said it didn't believe it had violated antitrust laws and that DRAM prices are normally prone to volatility.

Some market watchers dismiss the notion that Micron would have collaborated to fix prices in DRAM, a notoriously competitive industry. Nam Hyunk Kim, a senior analyst for memory at research firm iSuppli, said it's unlikely that Micron would have conspired to fix prices at a strategic, corporate level, because doing so would have hurt its ongoing efforts to grab market share. "The DRAM market is a zero-sum game. If you have more market share, your competitor has less," he said.

However, it's conceivable that individual employees might have been involved in price-fixing, he noted.

Indeed, earlier this month, one of 50 regional sales managers at Micron pleaded guilty to obstructing justice in a case that involved documents that contained pricing information about a DRAM competitor. Micron said the charges related to "personal actions" and didn't pertain to the company itself.

An admission of price-fixing from Micron would be part of a strategy to avoid prosecution,

Bloomberg

reported.

Other firms reportedly involved in the scheme are

Infineon

(IFX)

,

Hynix

and

Samsung

, three companies with which Rambus has had extensive legal dealings. The existence of a price-fixing scheme among them is central to an argument Rambus has used to defend itself in a Byzantine legal entanglement that goes back nearly a decade. Rambus is accused of manipulating an industry group into adopting semiconductor standards for chips on which it already had patents pending.

Rambus, which is being sued by the Federal Trade Commission, has long held that it did nothing wrong while it was a member of the industry group, the Joint Electron Devices Engineering Council. Indeed, Rambus has argued it was the others that acted unlawfully, conspiring to raise prices on a competing chip to Rambus' disadvantage.

Rambus is currently awaiting a ruling in the FTC suit after the judge in the case last week said he would need more time to weigh evidence. The government's suit alleges Rambus illegally gleaned insights into the standards-setting process while a member of JEDEC in the early 1990s, then incorporated into its patent applications technologies it knew were likely to gain currency.

Rambus' shares began the year just below $7 each and have been among the

Nasdaq's

top performers, thanks to a series of rulings that many believe have tipped the legal scales in its direction. One major success came in February when an appeals court threw out a fraud ruling against the company on grounds the standards-setting group's bylaws were too vague to be enforced.