Ruling Relief Sparks Rambus Shares

It could have been worse -- a lot worse.

That sense of relief sent RambusRMBS shares soaring Monday, as investors deemed an anxiously awaited regulatory ruling to be a slap on the wrist.

In a 30-page opinion, the Federal Trade Commission capped royalty rates that Rambus can collect from companies that use certain types of computer memory.

The commission set a maximum rate of 0.5% for DDR SDRAM and 0.25% for SDRAM.

But the commission said nothing about DDR2, the current flavor of memory used in the majority of PCs, nor did they rule on DDR3, which is expected to be the next major memory standard.

"It puts a cap on a product that has largely already transitioned out of the market," says Pacific American Securities analyst Michael Cohen, who personally owns shares of Rambus. "So, from a money perspective, it really doesn't mean that much."

Rambus, based in Los Altos, Calif., designs and licenses technology related to computer memory. The company does not disclose its exact royalty rates, but analysts believe they are generally in the 3% range for many types of memory products.

The ruling represented the FTC's remedy for its August 2006 finding that Rambus engaged in a course of deceptive conduct in order to monopolize the computer memory market.

According to the FTC, Rambus essentially ambushed the industry by participating in a standard-setting organization, known as JEDEC, without disclosing the fact that it had patents on many of the technologies it was pushing to be included as part of the standard.