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Rambus gets a ratings boost

One analyst boosts the ego and valuation of Rambus, a developer of high-speed DRAM technologies.

    One analyst today boosted the ego and valuation of Rambus (RMBS), a developer of high-speed DRAM technologies.

    Robert Chaplinski, an analyst with Hambrecht & Quist, today doubled his price target for the Mountain View, California-based company, which licenses technology that speeds the transmission of data from memory chips to processors.

    Chaplinski raised his price target to $100 per share, from the previous target of $50 a share, and reiterated his "buy" rating on the stock.

    The stock surged 42 percent on the analyst's positive reinforcement. Rambus stock closed at 60-15/16, up 17-15/16 from yesterday's close of 43. Volume exceeded 5 million shares, about ten times the company's average daily trading.

    In a report released alongside the bumped-up target price, the analyst said the level of risk surrounding the company's long-term financial outlook has been reduced as Intel received working silicon for its Direct Rambus-based PC memory chipset ahead of schedule.

    "This level of silicon availability...indicates that Intel remains committed to making Direct Rambus technology the industry standard for PC main memory," said the report, adding that ten of the top ten worldwide DRAM manufacturers have licensed the technology. Chaplinski said that fact, along with Intel's successful development, "suggests the competitive landscape continues to evolve in Rambus' favor."

    Mark Edelstone, an analyst with Morgan Stanley Dean Witter, agreed that the company is extremely well-placed going forward, but he would not comment on other analysts' predictions or price targets.

    "They are well-positioned to become the predominate main memory for the PC market in 1999," Edelstone said. "Rambus licenses their technology, and it will become the next memory standard. They may start slow, but they will build momentum."

    The H&Q analyst said that, by 1999, Rambus penetration of the PC DRAM market should reach 10 percent. He estimated that penetration would increase to 40 percent by the year 2001, as the next-generation chips move into the mainstream.

    In its most recent quarter ending September 30, Rambus reported revenue of $7.8 million, up from $3.4 million reported a year earlier. Net income for the quarter was $1.1 million, or 4 cents a share, compared with a loss of $1.1 million, or 18 cents a share.

    Rambus generates all of its revenue by licensing its technology, not from selling chips.