Rambus

(RMBS) - Get Report

often acts like acourt case in the guise of a company. Earlier thisweek, shares skyrocketed when a judge recommended that theFederal Trade Commission

drop its antitrust suit.A week earlier, shares slumped when European regulators

revoked one ofthe company's patents.

But investors might want to take a peek at thecompany's actual business for a change. Overshadowedby the FTC ruling was anannouncement from chip giant

Intel

(INTC) - Get Report

in the past week that could conceivably undermineRambus' core business of licensing intellectualproperty for memory chips.

In a white paper presented Tuesday at theInternational Solid State Circuits Conference in SanFrancisco, Intel gave details of a new interfacestandard for memory. Using test chips frommemory-makers

Samsung

and

Infineon

(IFX)

, the standard appears to rely on a technologydifferent that that offered by Rambus. If that's thecase, the new standard could further marginalizeRambus, which has already alienated most of itspotential memory maker customers after years ofassiduous litigating.

Some say that's Rambus' reward for trying to browbeat the industry into paying expensiveroyalties for its intellectual property.

"It's too onerous; it's very costly," Fred Rambergof M.S. Howells & Co., an independent research andbrokerage firm, said of Rambus' royalties. "Under the currentconditions, they've boxed themselves into a corner, andpeople have tried to design around them for some time.Now they've shown they've done it."

Rambus' proprietary architecture was "conspicuously absent"from Intel's technology road map at the giantchipmaker's developers conference earlier this week, he noted.

"This

Intel announcement virtually devalues Rambus intellectual property as it relates to Intelprocessors moving forward," Ramberg predicted in aresearch note earlier this week. "Rambus will have a legacymarket and smaller niche markets to support, but ifIntel moves this new interface standard, a large partof the marketplace will have passed them by." (M.S. Howells doesn't have any investment banking relationship withRambus.)

While it's not 100% clear that Intel's newstandard will ultimately exclude Rambus technology,it's notable that Rambus declined to comment onwhether any forthcoming memory interface from Intelwould incorporate its technology. "It's a test chip, soI can't speculate on a potential product or what itwould or would not incorporate," said Laura Stark,vice president of the company's memory interfacedivision.

Intel currently uses a memory interface fromRambus known as RDRAM in its network processing units.Rambus is still reaping the benefits of a $200 milliondeal signed by Intel in 2001. At the time, thechipmaker agreed to shell out $10 million a quarter inroyalty payments through September 2006, in exchangefor access to intellectual property from Rambus.

To put that $40 million a year Intel payout inperspective, Rambus posted annual sales of $118million in calendar year 2003.

Rambus argues that it continues to offer an edge on thetechnology front. Intel's proof-of-concept test chipsthat were discussed at the conference earlier this week show"similar if not lagging performance to what we areshowing this week on silicon in production later thisyear," Stark said.

Toshiba

and

Samsung

have already saidthey will include Rambus' next generation memoryinterface, known as XDR, in their DRAM (dynamic randomaccess memory) chips.

Despite those wins, Ramberg argued that Rambus needs to make astrategic shift and dramatically lower license fees if it wants to avoid beingincreasingly pushed to the fringes of computing.

"If they become a kinder, gentler Rambus, theycould reinvent themselves," he mused. "But itwould take a real sea change in how Rambus has donebusiness to regain their position in the mainstreammarketplace. That's not to say they won't, it's just tosay they won't the way they currently operate."

To be sure, other analysts think concerns about Intel'sannouncement are overblown. "This is not somethingthat I think people should get worked up over, becausedetails are so scant. It does not necessarily precludeany Rambus

intellectual property," said MikeCrawford, an analyst who covers Rambus at B. Riley &Co. He owns shares in Rambus.

"We'll have to see how

the Intel memoryinterface plays out for cost -- which is always veryimportant for memory -- as well as see how quicklyit's adopted," added Steve Allen, an analyst forSierra Tech Research.

Still, the news from Intel bearsclose watching for Rambus investors. Given that Intel'slicensing fees accounted for one third of Rambusrevenue last year, it would be a mistake to underestimate thepotential fallout for Rambus if Intel shouldeventually decide to go in another direction.

In recent trading, Rambus shares were down 28cents, or 0.8%, to $33.79.