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Rambus hit by delays, downgrades

Rambus Inc. (Nasdaq: RMBS) shares were off 11 percent Monday after the company confirmed bugs in Intel's 820 chipset, also known as "Camino." Morgan Stanley Dean Witter and SG Cowen were among the investment firms downgrading the stock.

In early trading, Rambus was down 7 7/8 to 63 1/4. The stock fell 15 to close at 71 7/8 on Friday on speculation about the bugs.



Rambus: Can it rebound?



Rambus (chart) said it was in the process of working out several bugs with Intel (Nasdaq: INTC) which have been found in the chipset. Rambus shares have been hammered on concerns about the delays and the effects of the Taiwan earthquake.

Meanwhile, analysts have been abandoning the stock. Morgan Stanley Dean Witter added to the chorus of Rambus downgrades Monday, shifting the stock from "strong buy" to "outperform," and lowering its price target to $110 from $150. SG Cowen also chimed in, cutting Rambus to "neutral" from "buy." Shares tumbled Friday after a downgrade from BancBoston Robertson Stephens.

In a statement, Rambus said that "some issues" have been identified in testing of three modules of Rambus-based computer memory that are part of the highly anticipated, but already behind schedule, Intel 820 chipset.

The package of chips would have enabled the first use of next-generation Rambus memory in PCs Monday. Although the bugs have caused delays, several OEM (Original Equipment Manufacturer) reinforced Rambus' according to their company's release. Intel and Rambus are working along with other OEMs to resolve the problems, which are related to the combination of the memory system components, module configurations, and motherboard designs in the chipset.

"Intel believes RDRAM is the memory solution that will provide the best performance with today's high-performance microprocessors," the company said. Toshiba and Dell also reaffirmed their belief in Rambus' memory architecture. RDRAM is Rambus-made DRAM, the most common type of computer memory.

Analysts aren't buying it. BancBoston Robertson Stephens analyst Daniel T. Niles downgraded Rambus, Friday from a "buy" to "long-term attractive," reasoning that "the company's infrastructure for a large-volume transition to new technology will take longer to build than anticipated."

"The current version of Intel's Camino chip-set, which supports Rambus, has bugs and could potentially be delayed yet again," Niles added. "In our view, the slow growth of the high-end PC market and the spiking DRAM picture is also negative for Rambus. Especially with the Taiwan earthquake problems and already high DRAM prices, it is unlikely that PC OEM's would pay even more for Rambus product."

"We believe that most PC OEMs are now planning to adopt Rambus in first-quarter 2000 at the earliest," said Niles. "We believe first-quarter 2000 RDRAM volume for PCs could be 1 to 2 percent."

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