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Rambus technology vindicated

Shares in the DRAM developer climb following an announcement that industry heavyweights are embracing the company's core technology.

2 min read
Shares of Rambus have climbed more than 24 percent since an announcement yesterday that industry heavyweights are embracing the company's core technology, which allows computers to work more quickly and efficiently.

Rambus' stock, which has been on roller-coaster ride since going public in May of 1997, rose nearly 20 percent after the company said that both Dell Computer and Compaq Computer confirmed they would ship PCs that use Rambus' Direct DRAM technology beginning next year.

Additionally, Rambus announced that Intel began testing the technology, which allows a computer's central processing unit to share information from memory chips more quickly and in higher volumes.

The surge in Rambus' stock is still far off its 52-week high of 86.75 during the second-half of last year. But after it became clear that the company would not be able to deliver its DRAM technology as quickly or in the volume that some analysts had expected, its stock fell sharply, trading as low as 35.5 during the last year.

Analysts said yesterday's announcement vindicates Rambus, which for the last six years has been promising that its technology would revolutionize the PC industry.

"It's a milestone along the way to Intel's use of Rambus in the PC," said Jim Handy, a memory chip analyst with Dataquest. Despite the enormous promise of Rambus' Direct DRAM, he said, the product--akin to a pipe that funnels information from a computer's memory to its CPU--is used only in low-end workstations and video games.

While hurdles remain to Rambus' technology becoming a standard component of the PC, investor skepticism is being offset by the huge revenues analysts are projecting for the company if it ultimately is successful.

In addition to the promise of its technology, Rambus' high-profile initial public offering was helped in large measure by its backer, Kleiner Perkins Caufield & Byers, a high-tech venture capital firm that has taken other high-flying stocks--including those of @Home and Amazon.com--public.

Brian Matas, vice president of market research at IC Insights, agreed that yesterday's announcement is an important right of passage for Rambus.

"Now that [Dell and Compaq] have announced products that actually incorporate this technology, I think that goes further along the line toward solidifying their technology and solidifying their validity as a company," he said. "To be associated with these big companies bodes well."