FTC Rules Against Rambus, Shares Plummet 26%

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FTC Rules Against Rambus In Memory-Chip Patent Case

• Summary: The FTC, in a unanimous 5-0 vote, found Rambus Inc. (RMBS) guilty of monopolistic tactics yesterday, in a case that could change the rules of the game for company behavior involved in setting industry technology standards. The FTC found Rambus had intentionally withheld information about its patents and patent applications from an industry standard-setting group, then later on, began trying to enforce its patents against companies adhering to the standards Rambus had ignored. Shares of Rambus, a Silicon Valley developer of technology used in memory chips that has been embroiled in legal battles, plunged 26% on the news. Micron (MU), which is currently battling in court with Rambis, issued a statement applauding the FTC ruling, stating the opinion supports its own counter-charges against Rambus. Technically the FTC opinion is not binding on other pending patent-infringement cases in which Rambis is involved. In response to the FTC ruling, shares of Rambis fell 26% in composite trading. Affected by an internal stock-options investigation as well as legal news, shares have declined over the past few months from a 52-week high in mid-April of $46.80 to just $12.65 yesterday.

• Comment on related stocks/ETFs: Despite the company's many legal troubles, Rambus recently reported a strong quarter with increased revenues of 22% from the same period last year. On August 1 the day before the FTC's recent ruling, Rob Black reported in his Tech Stock Report that BWS Financial upgraded Rambus to a BUY with a $22 target price, believing that the low share value provided a good entry point and that Rambus' underlying business is still sound.