Eye on Oracle

Sep 29 2010   2:52PM GMT

Should Oracle thank Micron instead of suing them?

Mark Fontecchio Mark Fontecchio Profile: Mark Fontecchio

DRAM from Micron

Oracle has sued memory manufacturer Micron Technology, Inc., a federal lawsuit that looks like a money grab for transgressions that happened 10 years ago.

The lawsuit, filed on Friday, aims to “recover damages caused by a long-standing conspiracy among manufacturers of dynamic random access memory (DRAM) computer chips.” In addition to Micron those conspirators, according to Oracle and based off a federal Department of Justice investigation, include Hynix Semiconductor, Infineon Technologies, Elpida Memory and Samsung. It is unclear why Oracle is only suing Micron right now.

In the lawsuit, Oracle refers to these companies as “the DRAM cartel.”

The DOJ found that the companies, which accounted for about three-quarters of DRAM manufacturing in 2000, engaged in price fixing to close off the market and overcharge customers. Oracle is claiming that between 1998 and 2002, Sun bought more than $2 billion worth of DRAM at inflated prices for use in its servers and workstations.

The DOJ investigation wrapped up in 2006 and led to billions in fines for the companies, and even imprisonment for some.

Now as for Oracle’s reason for bringing the lawsuit:

“Oracle, as successor in interest to Sun, has standing to bring this action, because Sun purchased DRAM from Micron and its co-conspirators during the Conspiracy Period. In doing so, Sun was injured by Micron’s and it’s co-conspirators’ unlawful actions, because it paid more for DRAM than it otherwise would have, as described more fully above. These higher prices caused Sun to lose money and customers, who could not afford to purchase Sun’s products containing artificially high-priced DRAM.”

Though Oracle might have a legal argument here, the logical idea of it seems far-fetched. When Oracle acquired Sun, it paid $7.4 billion, or $9.50 per share. Back in the early 2000s, Sun stock was going for north of $200 per share.

So now Oracle is suing Micron for causing Sun to lose money and customers, which eventually led to its stock being cheap enough so that Oracle could buy Sun. Right?

Shouldn’t Oracle be thanking Micron here?

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