Rambus’ Quarterly Profit Drops 36%

Rambus Inc. said second-quarter profit fell 36% because of higher legal costs racked up as the memory chip designer sued rivals to protect its patents.

Net income fell to $5.36 million, or 5 cents a share, from $8.32 million, or 8 cents, a year earlier. Sales jumped 14% to $40 million.

Los Altos, Calif.-based Rambus sued Samsung Electronics Co. for alleged license infringement June 6, adding a new case to legal battles with Hynix Semiconductor Inc. and Micron Technology Inc. Rambus says its patents cover all semiconductors in the $26-billion memory-chip industry. Adding the world’s largest memory-chip maker to its list of legal opponents caused expenses to rise.

“Until the lawsuits are settled with Samsung, they are not going to pay,” said Gary Mobley, an analyst at B. Riley & Co. in Los Angeles. Rambus also “alluded to another royalty payer dropping off. Perhaps that’s cause for concern.” He has a “buy” rating on the stock and doesn’t own it.

This quarter, sales may decline to $32 million to $35 million, Rambus Chief Financial Officer Bob Eulau said in a conference call. He forecast expenses of $31 million to $35 million and legal costs of $8 million to $10 million. Sales totaled $38.8 million in last year’s third quarter.

Sales will fall as Rambus loses licensing payments from Samsung and other companies’ agreements expire and come up for renegotiation, he said.

Rambus sells its designs and gets royalties on patents it says cover fundamentals of all memory-chip design. Contract revenue was little changed from a year ago at $5.39 million. Royalty revenue rose to $34.6 million from $29.6 million a year earlier.

Litigation expenses more than doubled to $9.98 million from $4.75 million a year earlier. The amount spent on legal cases declined from the $11.1 million spent in the first quarter.