Updated from 4:25 p.m. EDT

Third-quarter earnings rose 40% from a year ago at Rambus ( RMBS) thanks to a gain related to a debt buyback. The semiconductor company's top line slipped as both contract and royalty revenue showed year-over-year declines.

Rambus earned $14.5 million, or 14 cents a share, in the quarter, compared with $10.4 million, or 10 cents a share, a year ago. The latest quarter had a pretax gain of $18.6 million from a note repurchase.

Overall revenue fell 7% from a year earlier to $36.0 million, reflecting a 4% dip in contract revenue to $8 million and an 8% decline in royalty revenue to $28 million. Sequentially, contract revenue rose 48% from the second quarter while royalty revenue fell 19%.

Rambus blamed the decrease in royalties primarily on fewer SDRAM and DDR-compatible royalty agreements outstanding during the third quarter of 2005. Higher sequential contract revenue reflected new contracts for its XDR and FlexIO interfaces and a contract for high speed serial link interfaces.

The single analyst estimate compiled by Thomson First Call called for earnings of 2 cents a share on sales of $33.1 million in the quarter.

The stock closed at $11.60 Monday, about $1.40 above its 52-week low. In after hours trading, it rose 55 cents, or 4.7%, to $12.15.

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