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Rambus shares soar 50%
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June 16, 2000: 2:40 p.m. ET
Stock jumps as Toshiba signs patent agreement, analyst upgrades firm
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NEW YORK (CNNfn) - The stock of Rambus Inc., a designer of high bandwidth chip-connection technologies, soared 50 percent in mid-day trading Friday after the company announced a patent agreement with Japanese electronics firm Toshiba Corp. and received an upgrade from an influential Morgan Stanley analyst.
Rambus (RMBS: Research, Estimates) said after the market closed Thursday the new agreement with Toshiba covers patents for "fundamental aspects of high-speed memory interfaces invented by Rambus."
"This agreement ensures that Toshiba has rights to these important Rambus patents, which are necessary to continue providing our customers with their choice of memory and logic products," Toshiba Semiconductor Co. President and CEO Yasuo Morimoto said.
Toshiba has developed and sold Rambus-compatible chips since 1990. The Japanese company said Thursday it will continue to be a leader in providing memory chips based on Rambus technology and Rambus-compatible logic products.
At mid-day Friday, Rambus had soared 28-5/16 to 85, a whopping 50 percent gain on heavy volume. At its current price, Mountain View, Calif.-based Rambus has a market value above $8 billion, even though its revenue for the quarter ended March 31 totaled only $15.7 million. The stock trades at more than 500 times what Morgan Stanley Dean Witter's Mark Edelstone expects the company will earn in 2000 and 240 times his forecast for 2001 earnings, multiples that are mind-boggling by conventional standards.
 Edelstone, the most influential analyst covering Rambus, reacted to the Toshiba announcement by upgrading his rating on Rambus to "strong buy" from "outperform." He didn't change his earnings estimates for the company or his 12-month price target, which is $125 per share, following a four-for-one stock split that became effective Friday.
"The Toshiba accord legitimizes Rambus' intellectual property and could create a chain of events in which Japanese companies license their technology," Morgan Stanley Dean Witter said in a research note issued Friday.
Rambus technology is designed to address the performance speed gap between computer microprocessors and dynamic random-access memory (DRAM), which stores instructions and data needed by the microprocessors. In recent years, microprocessors and controllers have become substantially faster and more powerful than DRAM. Rambus licenses its technology to several major chip makers, including Intel Corp.
Avo Kanadjian, vice president of worldwide marketing at Rambus, said Toshiba studied Rambus' patents and found Toshiba was using Rambus technology in electronic components called SDRAMs and controllers without a license agreement from Rambus. Last January, Rambus filed suit against Hitachi Ltd. for allegedly infringing its patents. Kanadjian said that Toshiba entered into the license agreement on its own without being pressured by Rambus and that the two companies continue to have a good working relationship. 
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