Lexar Shares Soar After Legal Win Over Toshiba

Shares of Lexar Media Inc. (LEXR), a maker of memory cards for digital cameras and MP3 players, doubled in price Thursday after a California court ordered Toshiba Corp. (search) to pay Lexar $380 million in damages on grounds Toshiba was liable for theft of trade secrets.

The jury in the California State Superior Court in San Jose, found Japan's Toshiba, one of the world's biggest chip makers, liable for breach of fiduciary duty, and also found that Toshiba's actioort an award of punitive damages, which are yet to be decided.

CIBC World Markets analyst Daniel Gelbtuch said Lexar's stock was buoyed by the potential for an influx of cash to the company, whose losses have been mounting. He upgraded the stock to "sector outperformer" from "sector underperformer" saying that the court could set a punitive damage award of $1 billion.

"This is purely a cash-per-share increase in the stock price and it negates the notion that they are going to go bankrupt," he said.

The $380 million award is some $100 million greater than Lexar's market capitalization.

Lexar shares jumped $3.16 to $6.33 on Nasdaq (search), after reaching $6.62 just after the start of trade Thursday.

Lexar, whose postage-stamp-sized cards are used in popular consumer gadgets such as mobile phones, cameras and MP3 players, said it plans to ask the court for an injunction that halts the sale of Toshiba's products in the United States, including Toshiba's flash memory chips, its CompactFlash (search), Secure Digital and xD Picture Card products.

In the lawsuit, Lexar claimed that its secrets were misappropriated by Toshiba after it invested in Lexar in 1997 and received a seat on its board. Lexar said the board member fed confidential data and documents to a Toshiba executive who was in talks with SanDisk Corp. , Lexar's bigger rival.

Toshiba later entered into a deal with SanDisk to make flash memory, using chips that incorporated Lexar Technology, Lexar charged.

A Toshiba spokesman in Tokyo said the company could not comment as the jury is still continuing discussions on the case.

Analysts said that while the court's decision does not directly affect SanDisk, it may influence Lexar's ongoing patent lawsuit with Toshiba, which could eventually touch other players in the flash memory market.

Shares of SanDisk slipped 15 cents to $27.80 in morning trade on Nasdaq.