Rambus Inc, a computer memory-chip designer, said fiscal first-quarter profit fell 53 percent as declining chip prices reduced royalties from semiconductor companies that use its designs.
Net income in the period ended Dec. 31 fell to US$6.17 million, or 6 cents a share, from US$13 million, or 12 cents, a year earlier.
Sales fell 28 percent to US$24.9 million. The per-share profit was 1 cent more than Rambus' own target, Chief Financial Officer Bob Eulau said. The shares rose as much as 8.7 percent.
Rambus creates chip systems that speed programs such as databases, digital photography and games. Customers, which include No. 1 chipmaker Intel Corp, Sony Corp and Samsung Electronics Co, pay Rambus royalties and other fees for use of the company's more than 100 patents. As memory prices fell last year, Rambus' royalties dropped. Earnings were also eroded by expenses for the company's legal fight to get more chipmakers to pay license fees.
"With litigation still pending and Intel supporting other types of memory, it could be downhill from here," said Greg McClendon, director of research at Hotovec, Pomeranz & Co.
McClendon's last rating on the shares, which he doesn't own, was "sell." He had that rating from January to June of last year.
The shares of the Los Altos, California-based company rose 4 cents to US$8.59 in regular trading today before the earnings report. They rose as much as 75 cents to US$9.34 after the release. The stock dropped 78 percent in 2001.
Litigation expenses, related to Rambus' legal battle against Micron Technology Inc, Infineon Technologies Inc and Hynix Semiconductor Inc, rose to US$4.51 million from US$4.28 million a year earlier, the company said. In the fiscal fourth quarter, legal costs were US$6.81 million.
Rambus says the three companies infringed its patents, while the chipmakers have denied the allegations.
Royalties in the first quarter fell 19 percent to US$21.8 million from US$26.8 million, mostly because of falling memory prices, the company said. Rambus' percentage of revenue from each chip customers sell is pegged to the price of the chips.
Second-quarter profit will be 5 cents a share, Eulau said on a conference call. Revenue will fall 3 percent to 7 percent from the first quarter's, with litigation expenses about the same.
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