Updated from 12:04 p.m. ET
shares were getting hammered Tuesday on renewed fears over the company's increasingly tenuous relationship with microprocessor giant
Rambus finished regular trading off $8.50, or 16%, at $44.94. The catalyst for the decline seems to have come from trade publication
Electronic Buyers' News
, which wrote Saturday that it had obtained a confidential Intel "road map" showing the company cutting Rambus DRAM from every platform except high-end computer workstations by the middle of 2001. The report was posted again on the magazine's Web site Monday.
Rambus DRAM, or dynamic random access memory, accelerates the communication of data between a PC's memory and logic chips, but the relatively high cost of the technology has slowed its acceptance.
report offers the latest example of how Intel has been distancing itself from Rambus.
Intel inked a development and licensing contract with Rambus in late 1996, and in 1998 bought a minority stake in memory-maker
under the assumption that Micron would produce DRAM supporting Rambus technology. But Micron's resistance to that project -- it's currently suing Rambus for antitrust violations -- led Intel to sell its stake in the company for more than $2 billion this summer. And last week, Intel President Craig Barrett confirmed what many had long believed when he said publicly that signing an exclusive agreement to support Rambus memory was "a mistake."
An Intel spokesman declined to comment specifically on
story. "We explained back in August that we're committed to Rambus DRAM as the solution for the performance PC segment," he said. "That continues to be what we're doing." Rambus didn't return a call seeking a comment.
Rambus believes that its patents apply not only to its proprietary Rambus DRAM, but also to the other two leading types of computer memory, synchronous DRAM and double data rate, or DDR, memory. The company has already gotten four memory producers --
-- to agree to pay royalties on SDRAM and DDR memory. Rambus is either litigating or negotiating with nearly every other manufacturer of DRAM.
It's important to note that what
is reporting has no bearing on whether Rambus will be able to continue to collect royalties on SDRAM and DDR memory.
"Investors are selling the stock for the wrong reasons," said Mark Edelstone, an analyst at
Morgan Stanley Dean Witter
, which took Rambus public three years ago. "Intel's support, or lack of support, is now irrelevant for the stock. The key issue is Rambus' ability to exert its intellectual-property claim surrounding SDRAM and DDR DRAM. Our earnings estimates will go up significantly if they can successfully defend their intellectual property."
"That's been the story since June, and it's clear that people don't fully understand that," said Edelstone.
Maybe not. But investors are coming to understand the extreme volatility inherent in any stock whose fortunes are tied to a long road of litigation.