Rambus rockets on Intel news
CFO sees surge in sales as Intel expands use
By Binti Harvey, CBS MarketWatch
Last Update: 2:54 PM ET Jul 30, 1998 Also see Tech Report
SAN FRANCISCO (CBS.MW) -- Rambus Inc. shares jumped 18 percent Thursday afternoon after the company said it expects Intel to use its memory technology in all Intel chipsets by 2001.
Intel, the world's largest semiconductor manufacturer, already uses Rambus (RMBS) systems for its high-end chips. Its expected to convert the remainder of the product line to Rambus systems by 2001, Chief Financial Officer Gary Harmon said during a presentation at the Robertson Stephens semiconductor conference.
Harmon expects that success to be duplicated in the larger dynamic random access memory market. "The most important point we've made here is that by 2001, 50 percent of the DRAM market will be converted to Rambus' memory solutions," Harmon said.
The royalities Rambus generated from such a trend could add billions to the company's revenue. Rambus shares gained 9 3/8 to 61 7/8 in late trading, still well below its 52-week high of 86 3/4.
Wider margin
Rambus licenses its memory and chip interface technology to a number of chipmakers, PC manufacturers and network equipment makers. It obtains its revenue from new licensing contracts and royalties.
Over the past several years, the company as derived most of its revenue from new contracts, but Harmon sees the market for new licensees drying up because the company already has entered agreements with many of the major players.
Harmon believes the company is now poised to reap a substantrial portion of its revenue from royalties, thanks primarily to a push to convert its chipsets completely to Rambus' memory technology.
As its technology penetrates the DRAM market, replacing older-generation technology, its costs will decline. The accompanying expansion of royalty revenue will also increase its operating margins.
"We expect high operating margins, increasing as we penetrate the market," Harmon said.
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Binti Harvey is a reporter for CBS MarketWatch.
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