Fortune article - don't think it's been posted:
07/06/98
Fortune Magazine
Time Inc.
Page 220
When Rambus went public in May of last year, it quickly became Wall
Street's darling. Its recipe for a stellar performance was a mix of killer
technology and incredible buzz. Analysts had long praised the company's
breakthrough technology --a design for the "bus" interface that shuttles
data between a computer's memory chips and its microprocessor. Plus,
Intel had chosen Rambus ' interface for future chip designs, effectively
making it an industry standard. This caused other memory chip
manufacturers, like Micron Semiconductor, IBM, and NEC, to line up
for their licenses. Even kids (unwittingly) enjoyed Rambus '
technology--Nintendo 64 game systems have been equipped with the
interface since 1994.
Rambus mania seized Internet discussion groups (a tiny sample of their
vast correspondence is reproduced below). The groupies bought shares
and touted them--some predicted the stock's price would increase
eightfold. It almost matched their hopes, soaring 600% after its IPO to
$84 in 14 weeks.
This, it seemed, was a company that couldn't lose.
But today Rambus trades at a paltry $36. What spoiled the coming- out
party? For one thing, Rambus fell victim to competitors' envy and
craftiness. Some of the same companies licensing Rambus ' technology
began work on an alternative interface, called SyncLink. Simultaneously,
existing memory chip technology--which Rambus ' interface was meant
to replace--became cheaper, dampening the appetite for more expensive
chips.
This combination of obstacles spooked investors. Internet message
boards again fanned the flames. A rumor circulated on the Net that Intel
would back away from supporting Rambus ' standard. This was
countered by speculation that Intel itself was spreading the gossip as part
of its negotiating strategy.
So is it time to sing a dirge for Rambus ? Not so fast, say the analysts.
For starters, SyncLink doesn't appear to be such a threat. Its interface
will be only about half as fast as Rambus '. And it will work better in
servers than in the mainstream PC market, say analysts. More important,
Intel will still adopt Rambus ' interface, just a quarter or two behind
schedule, says Mark Edelstone of Morgan Stanley. "If anything, Rambus
' fundamentals have gotten better. It's a story where we're waiting for
earnings power to kick in," Edelstone says. "We strongly believe it will
happen starting second quarter of next year. Everything between now and
then is just noise." The stock will reach $100 in the next six to 12 months,
says Rob Chaplinsky, an analyst with Hambrecht & Quist. Ready for
another ride? |
