Rambus rides earnings fallout

Stock in the up-and-coming company jumps but then retreats after announcing that it met analysts' expectations for its fourth-quarter income.

Stephen Shankland Former Principal Writer
Stephen Shankland worked at CNET from 1998 to 2024 and wrote about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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Stephen Shankland
2 min read
Shares of Rambus, developer of an up-and-coming computer memory technology, jumped in early trading but then retreated after the company announced fourth-quarter earnings yesterday that were in line with Wall Street expectations.

Rambus reported fourth-quarter net income of $1.75 million, or 7 cents per diluted share, compared with net income of $1.06 million, or 4 cents per share, for the same quarter a year ago.

Those earnings met analysts' expectations of 7 cents share, according to First Call.

Rambus stock jumped 4.07 percent to 64 at the opening bell, but then lost ground to trade at 60.875, down 0.625 of just over 1 percent, by late afternoon. The company's shares have traded as high as 71.88 and as low as 35.5 during the past 52 weeks.

The company is likely to get a further boost after Intel announced it had invested $500 million in Micron Technology. Intel said that it hopes to help drive personal computer industry growth by accelerating the adoption of Direct RDRAM, a high-speed memory interface technology developed by Rambus. Micron licenses technology from Rambus.

For the quarter ended September 30, the company had revenues of $9.66 million, an increase of 24 percent over the same period in 1997, and an increase of 5 percent over the previous quarter. Rambus reported revenues of $7.82 million during the fourth quarter last year.

Rambus has developed a high-speed connection between computer processors and memory, a bottleneck that's become increasingly significant as processors run at faster and faster speeds.

Rambus has achieved success licensing its next-generation memory technology to major computer companies, most notably Intel, but also IBM, Compaq, and others.

Rambus had net income of $6.88 million for its 1998 fiscal year. For fiscal year 1997, Rambus had net income of $1.98 million. The company had total revenues of $37.9 million for its 1998 fiscal year compared with revenues of $26 million last fiscal year.

Brian Matas, vice president of market research at IC Insights, said Rambus's growth probably was put on hold for a quarter or two by the weak global memory market.

Fundamentally, though, Rambus has a strong technology, he said.

"Investors know it's a decent technology, and know it's going to go up. Once it takes off, it'll probably [grow] pretty rapidly," Matas said.

Intel's reasonably good performance and AMD's strong chip shipments is good news for Rambus. As requirements for a faster connection between memory and the processor increase, "we'll probably see Rambus's revenue and net income grow a little bit more," Matas said.

A more serious long-term issue is the significant royalty that licensees pay to Rambus. Computer manufacturers see the royalty they pay to Rambus as a thorn in their sides, and they'll be happy to switch if they find a technology that's as good as Rambus, "and that does not have the premium associated with it," Matas said.