Intel Inches Away From Rambus

Rambus' stock has fallen on word from Intel that the chip giant would now support non-Rambus DRAMs.
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SAN FRANCISCO -- Shares of memory-chip designer Rambus (RMBS) - Get Report plummeted to their lowest point since Oct. 8 today after Intel (INTC) - Get Report said on Thursday that it would support alternative chipsets.

At an analyst meeting held Thursday, Intel executive Paul Otellini said the chipmaker would come out with chipsets this year for non-Rambus synchronous DRAMs. This is a major blow for Rambus, since Intel was one of the strongest and earliest backers of its designs. Memory-chip makers have balked at adopting Rambus designs because of the hefty royalties they would have to pay to the company.

Recently, as memory-chip makers began looking for alternatives to Rambus, Intel had issued statements supporting the company's designs. Many institutional and individual Rambus investors held on, waiting to see if Intel would drop its support of the company.

Now Intel seems to be tiptoeing away.

After opening at 59 1/8 today, Rambus stock dropped 12.8% to 51 1/2, a half-point below its Oct. 8 closing price, in heavy volume. By midafternoon today, it had climbed up from its session lows to hover around 55 1/8, down 2 1/2.

On Thursday,

Credit Suisse First Boston

analyst Charles Glavin said the memory-chip industry is expecting a new Intel chipset (currently called 810E) in the next quarter that will support PC-133 DRAMs, a stopgap alternative to the Rambus design, for Intel's entire line of chips, from the low-cost Celeron to the high-priced Xeon.

Shares of Rambus hit an all-time high of 109 1/2 on Jan. 11, but fell after lead underwriter

Morgan Stanley Dean Witter

downgraded them to neutral based on their high valuation. Three weeks later, Morgan Stanley upgraded the company back to outperform to reassure investors that

rumored delays by Intel in shipments of Rambus-designed chipsets were largely discounted in the stock price.

But the speculation continued to dog the company.

Micron

(MU) - Get Report

CEO Steve Appleton went out of his way on his company's March

conference call to cast doubts on whether Rambus chipsets would be out this year at all.

In recent postings on Internet message boards, Rambus shareholders have vented their frustrations about the latest developments.

"Perhaps Intel is figuring that the whole world doesn't need to move to

Rambus-designed RAM as quickly as possible," says one message posted by "Tenchusatsu." "I still think it will happen, just not as soon as I originally thought."

Another poster suggests that Rambus might now have to compete on the merits of its technology rather than its Intel sponsorship. "For what it's worth, I'm taking

Rambus off my screen," says the message, signed "Robert Jacobs." "I plan to tuck my 7,000 shares that I bought in the '70s into bed for a nap ... and rouse them two years from now to see whether there should be some sales."

One institutional fund manager who asked to remain anonymous says she bailed out of Rambus back in January at the high. "We felt the stock price had reached a value for revenue that we had not expected for several years out," she says.

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