Rambus plunges along with chip prices

Falling prices for memory chips translated into a falling share price for Rambus Friday, following the memory-chip maker's third-quarter report. Shares in the designer and licenser of Rambus Direct RAM (RDRAM) chips were down $1.45, or 13 percent, to $9.43.

Thursday night, Rambus reported third-quarter net income of $3.7 million, or 4 cents per share, in line with First Call's estimates but below the $4.6 million, or 4 cents per diluted share, reported in the year-ago period. Sales rose to $23.3 million from $17.76 million in the year-ago period, but fell from $31.25 million in the second quarter. Management attributed the shortfall to lower royalties, which were due to dropping prices and greater-than-expected legal battles.

The company, which gets revenue from royalty payments on the patents for its memory chips, has been troubled by litigation from competitors who insist its widely used memory chips shouldn't be under patent protection. Rambus said Thursday that expenses from the ongoing trials increased by $1.5 million to $8.8 million during the quarter. But the real news in Thursday night's report was projections that sales would continue to drop in the current quarter from the past three months. Continued weakness in the PC market and price reductions for both RDRAMs and SDRAMs, a similar type of memory chip, are expected to bring total revenues down 20 percent sequentially in the September quarter, the company said. -- Margaret Kane, ZDII