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Realtek payment to end infringement lawsuit with 3Com

“We view this development as a long-term positive.”

— Timothy Lam, Citibank analyst

Taiwanese networking chipmaker Realtek Semiconductor Corp (瑞昱半導體) said yesterday it had agreed to pay US$70 million in royalties to 3Com Corp, ending a patent infringement lawsuit with the US company.

Shares of Realtek jumped 4.8 percent to NT$70.4 yesterday after the firm made the announcement before the stock market opened.

The Hsinchu-based chipmaker said in a filing to the stock exchange that the agreement would help it develop new products and expand its business.

Realtek said the settlement meant it would no longer have to pay U$45.3 million in damages after a California court ruled in April that it had illegally used four of 3Com’s networking-related patents.

3Com said at the time that it planned to seek higher compensation for patent infringement.

“We view this development as a long-term positive as Realtek will retain rights to sell its 10/100 products with the lawsuit overhang removed,” Citigroup Inc analyst Timothy Lam said in a report released yesterday.

The settlement could alleviate market concerns about sales of Realtek’s products and that its legal costs could triple if the court ruled that it was a “malicious attempt” to infringe on 3Com’s patents, Lam said.

Realtek can now focus on developing next-generation wireless networking products and expanding its share of the wireless 802.11N networking chip market next year, the report said.

With the licensing fee payment, Realtek could post a loss of NT$50 million in the second quarter, instead of earning NT$640 million as estimated earlier, Lam wrote.

Nonetheless, Citigroup retained its “buy” rating on Realtek with a 12-month target price of NT$99, citing its sustainable long-term competitiveness.
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