Shares of Rambus ( RMBS) plunged Wednesday after the company announced it would restate financial reports dating back at least three years due to discrepancies in its stock-option accounting practices. The Los Altos, Calif. company said it is highly likely it had a material weakness in internal controls over financial reporting as of Dec. 31, 2005. Rambus also said it expects to received a notice from the Nasdaq threatening to delist its stock as a result of delays filing its most recent quarterly report. Rambus is the latest in a string of companies to come forward with such news, as a widening controversy over the so-called backdating of stock options grips the financial world. According to Rambus, which licenses technology for computer memory chips, an internal audit committee has reached a conclusion that the actual measurement dates for certain historical stock-option grants differ from the recorded grant dates for such awards. "The audit committee has not completed its work nor reached final conclusions and is continuing its investigation into the circumstances that gave rise to the differences," the company said in a statement. "The audit committee has determined, based on further analysis, that noncash stock-based compensation expenses should have been recorded with respect to those stock-option grants and recognized over the vesting period of the options, and that the amount of such additional expenses is material," the statement continued. Rambus announced in May that the audit committee of its board of directors had launched an internal investigation into the company's stock-option practices. Rambus said Wednesday that it expects the expenses arising from the investigation, the restatement and related activities, to be recorded in the periods incurred, to be significant. The company has not yet determined the tax consequences or related liabilities that may result.
Shares of Rambus recently fell 11.4%, or $2.23, to $17.36 in midday trading. The announcement comes on the heels of another piece of bad news for Rambus. According to news reports on Tuesday, a $307 million jury award that Rambus won in litigation against Hynix Semiconductor was recently halved by the federal judge hearing the case. In its announcement regarding backdating on Wednesday, Rambus said that financial statements for the fiscal years 2003, 2004 and 2005 should no longer be relied upon and will be restated. The restatement will also affect financial statements for prior fiscal years, Rambus said.