Why Rambus Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of chip interface technologist Rambus (NAS: RMBS) sank 10% on Friday after its quarterly results and guidance disappointed Wall Street.

So what: Rambus' first-quarter loss widened so sharply -- net loss of $27.9 million versus $4.2 million in the year-ago period -- that analysts have no choice but to lower their valuation estimates. Flat revenues, coupled with higher costs, continue to weigh heavily on Rambus' bottom line, reinforcing investor fears over its long-term profitability.

Now what: For the second quarter, Rambus sees customer licensing income of $54 million-$60 million on revenue of $53 million-$59 million, which also reflects weak sequential growth. "We are well positioned to build and develop the series of solutions and innovations that will enrich the experience of end-users around the world," CFO Satish Rishi reassured investors. "We will continue developing into a company that can take advantage of technology disruptions in large markets." However, given the strong margin headwinds working against Rambus and its quickly-fading litigation prospects, I wouldn't exactly bet on it.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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