Should You Care If Rambus Beats NVIDIA?

NVIDIA (Nasdaq: NVDA  ) must be getting used to the courtroom by now. Unfortunately, it's not an entirely pleasant experience.

The graphics-chip specialist was just handed its hat by Rambus (Nasdaq: RMBS  ) in a patent infringement decision by the International Trade Commission. During a 60-day presidential review period, NVIDIA can continue to sell and ship its chips anywhere, but those very fundamental actions will then supposedly become illegal. NVIDIA will appeal the decision, of course, while Rambus gloats amid a racing share price.

There will be a full-on license agreement in the end, but then there are years of back-paid damages to worry about for NVIDIA. The company promises to shield customers including Hewlett-Packard (NYSE: HPQ  ) from product shortages, and Rambus should be able to use this partial victory as ammunition when discussing royalty rates with NVIDIA, memory maker Micron Technologies (NYSE: MU  ) , and other potential clients.

Curiously, the decision had virtually no effect on shares of Advanced Micro Devices (NYSE: AMD  ) .

The reason why I find that interesting is that forcing NVIDIA to raise product prices or lower profit margins would be a positive for AMD. The ATI division is, after all, the only competition NVIDIA has in many market segments. Intel (Nasdaq: INTC  ) sells more graphics chips than anybody, but they're all of the low-performance and low-margin variety, while ATI/AMD and NVIDIA tend to aim a bit higher. NVIDIA has been doing a pretty good job of holding itself back in recent years, including the time it spends in other courtrooms fighting the legal eagles of Intel. But anything that hampers the company any further should be good news for AMD.

Will the Rambus decision hurt NVIDIA enough to make a difference, or is it just a minor annoyance for the graphics expert? Discuss in the comments box below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel is a Motley Fool Inside Value recommendation. NVIDIA is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Intel. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On July 28, 2010, at 3:01 AM, xuincherguixe wrote:

    Wow. There's an article that blindsided me. I didn't even know they still existed!

  • Report this Comment On July 28, 2010, at 9:09 PM, jjhii wrote:

    For the company it is a wee bit more than minor annoyance, time will tell how much. For the stock price I have a feeling it will have a longer laster effect.

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