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Rambus shares jump after stock-split news

Shares of the memory chip company gain 11 percent and reach an all-time high after it announces a 4-for-1 stock split.

Shares of memory chip company Rambus jumped 11 percent today to an all-time high after it announced a 4-for-1 stock split.

Rambus announced that the split would increase the number of common shares of the company to 500 million and the number of outstanding shares to approximately 96 million from 24 million.

The shares gained $41.56 to close at $421. Rambus shares, which topped $439 earlier today, traded as low as $51.50 during the past 52 weeks.

The much-hyped company makes an interface that accelerates the exchange of signals between a computer's memory and logic chips, alleviating a bottleneck that hampered the development of faster computers.

Analyst Arnab Chanda of Robertson Stephens said the stock price will stay strong "if it's true that Rambus becomes the standard for the DRAM market; if that does not happen, the stock will come down from present levels."

Rambus has an alliance with Intel, which is central to the company's future. "Obviously, without Intel the chances for Rambus are small, but the company really needs the support from the OEMs (original equipment manufacturers)," Chanda said.

He said he believes that the OEMs that actually assemble and sell computers must also support the Rambus design. "They hold the keys to the gate," he said. Dell Computer, IBM, Compaq Computer and Hewlett-Packard are some of the major OEMs.

The memory chip company likely will get a major boost later this year when Dell begins shipping Rambus PCs costing as little as $1,200, said Seth Dickson, a Warburg Dillon Read analyst. The memory currently only is available in higher-end PCs.

"People realize Rambus is the future of PCs from Intel," Dickson said. "There could be a little bit of air underneath it, but in the long term I think the stock supports this price over time."

However, the performance gains promised by Rambus won't be realized until Intel releases its Willamette CPU, the successor to the current Pentium III chip, he said. The speed of the pipeline, or "bus," for transferring data in and out of the CPU will increase from 133 MHz today to 400 MHz with Willamette, he added.

"The processor bus is the weak link right now," Dickson said. "The benefits of the Rambus (system) won't be apparent until 2001."