Chipmakers under the cosh

Infineon Technologies became the first semiconductor manufacturer to fall foul of US authorities' probe into price-fixing of high-speed memory chips.

The German D-Ram chipmaker was fined $160m, the third-biggest anti-trust fine in US history, after it admitted meeting other manufacturers between 1999 and 2002 to fix prices charged to computer manufacturers.

The move followed a two-year investigation into the market for D-Ram chips, used in computers, mobile phones and other electronic devices, by the US justice department.

“This case sends the messgage that high-tech price-fixing cartels will not be tolerated,“ said John Ashcroft, US attorney-general.

Some high-level Infineon employees helping with the investigation will be exempt from prosecution but others may face criminal charges.

The justice department did not name other D-Ram manufacturers targeted by the probe, but some PC makers have filed class-action lawsuits against several companies including Infineon, Samsung, Hynix, Micron and Nanya.

Samsung, the world's second largest chipmaker, will hope those suits come to nothing, because it is also facing an insider trading probe launched this week by the Korea Stock Exchange.

The investigation was triggered by a 4 per cent leap in shares at the end of last week as speculation mounted that Samsung was about to launch a share buyback in a bid to revive its flagging share price.

Lo and behold! the rumoured buyback appeared this week with Samsung promising to purchase 4m shares, valued at about $1.75bn, before the end of the year.

If the KSE finds that Samsung violated disclosure rules, it would be a blow to Samsung's reputation as one of the best run companies in Asia and would weaken its share price, already under pressure because of concerns about slowing earnings momentum.

Oracle enjoys unexpected twist

Oracle's hostile takeover bid for software rival, PeopleSoft, took another twist this week as the Department of Justice's attempt to block it was thwarted by a California court.

The decision came as a surprise to lawyers, who believe the government could now struggle to reverse the ruling.

The DoJ had expressed concerns that the merger of the two software companies was anti-competitive and risked an uplift in prices for products such as financial management and human resources software.

The government claimed that large companies had identified Oracle, Peoplesoft and SAP of Germany as the only suppliers for the complex software they required.

But the judge, who was criticised for “cherry-picking” evidence, ruled differently, saying that companies actually had a greater choice of software suppliers.

The DoJ now has 10 days to launch an appeal but some antitrust lawyers were less than confident that it would succeed in getting the decision reversed.

No doubt Oracle's shareholders will be looking for a speedy end to the saga as the group also revealed this week that its pursuit of Peoplesoft cost the group $29m in the latest quarter.

The group also reported a steep decline in sales of its new software applications licences. But it denied that its fight for Peoplesoft had caused it to neglect its core businesses, shrugging off the sales drop as a “one-off aberration”.

Better news came from Oracle's larger database business, which saw revenue jump 18 per cent in the three months to August 30. Total new software revenue rose by 7 per cent in the period.

But the group cautioned that the current quarter could be slower than expected, partly due to the absence of flattering currency effects.

More Microsoft software pirates convicted

German man and his father became the latest people to be convicted in a crackdown on a multi-million euro software counterfeiting ring.

Following an 18 week trial in Stuttgart, Dieter Rimmele was sentenced to three and a half years in prison with no parole, in addition to 10 months already served, after he was found guilty of copyright infringement and the sale of counterfeit Microsoft software.

The sentence follows a five and a half year term handed down in July to the group's ringleader, Ralph Blasek. Mr Rimmele's father was also found guilty for his participation in the scheme and received a 16 month sentence.

Both men were participants in one of Europe's largest software counterfeiting networks, which pirated Microsoft educational software, largely Windows- and Office-based products sold at a discount to schools and colleges, and resold the counterfeit versions at full price.

Microsoft, which has made product security one of its biggest priorities this year after a series of security concerns over its Windows operating system, has been cooperating with law enforcement agencies in Germany and elsewhere and welcomed the tough sentences.

In July Mr Blasek, a software dealer from Willich, near Bochum in Western Germany, was found guilty of repackaging more than 32,000 copies of software products and sold them on through his company Dino-Soft, defrauding the world's biggest software maker of about 4.5m and allowing Mr Blasek to live in the lap of luxury, owning properties around the world.

Mr Rimmele's arrest in November 2003 followed a massive German police operation, in which 142 pallets of illegal software were discovered.

Mr Rimmele was sentenced to a year in prison after a previous arrest in 1999 for software manipulation, but had continued to run his illicit operations from jail with the help of his parents.

Job cuts in the valley

The severity of the IT recession was brought into focus this week as a new report revealed that 400,000 jobs were lost in the US high technology sector between March 2001 and April 2004.

Silicon Valley took the strongest blow, with San Francisco and San Jose losing 49 per cent and 33 per cent of their workforces respectively over the three-year period.

The University of Chicago study said uncertainty over the pace of economic recovery had left IT companies reluctant to hire new employees and concerns had been heightened by the growing trend towards outsourcing.

But recent evidence points to a tentative improvement in the IT job market since April, so hopefully the valley can look forward to greener days.

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