John Bourgoin, MIPS president and CEO, said. “Fourth quarter revenue was the highest quarterly revenue in the last five years, and higher than any quarter in our history excluding our early Nintendo video games royalties. We added a record number of new royalty-paying customers during the year as a direct result of strong licensing activity that began three years ago. Toshiba joined our list of 24KE™ family licensees and we anticipate they will use our cores to bolster their next-generation digital consumer products in digital television and set-top boxes."
Net loss for the second quarter was $2.1 million, compared to net losses of $579K and $974K in the previous year and the previous quarter, respectively.
Chet Silvestri, Chief Executive Officer of MoSys, commented, "We continue to make solid progress on the strategic initiatives announced earlier this year. We signed multiple CLASSIC Macro licensing deals during the quarter, initiated programs with semiconductor manufacturers at the advanced 65 nanometer process geometry, and further broadened our relationship with Nintendo and NEC.”
The audit committee had reached a conclusion that the actual measurement dates for certain historical stock option grants differ from the recorded grant dates for such awards. The audit committee has not completed its work nor reached final conclusions and is continuing its investigation into the circumstances that gave rise to the differences. The audit committee has determined, based on further analysis, that non-cash stock-based compensation expenses should have been recorded with respect to those stock option grants and recognized over the vesting period of the options, and that the amount of such additional expenses is material.
Further, the audit committee, in consultation with management and after discussion with its auditors on July 17, 2006, has concluded that its previously issued financial statements for the fiscal years 2003, 2004, 2005, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, the Quarterly Reports on Form 10-Q filed with respect to each of these fiscal years and the financial statements included in the Company's Quarterly Report on Form 10-Q for the first quarter of fiscal year 2006, should no longer be relied upon and will be restated. In addition, the restatement will affect financial statements for prior fiscal years and the Company will reflect those adjustments as a part of the opening balances in the financial statements for the restatement period.
The company's filing of its 10Q for the quarter with the SEC will be delayed. This could lead to a delisting from the NASDAQ and possibly accelerate loan repayments.
A class action lawsuit has already been filed on behalf of Rambus investors by Roy Jacobs & Associates. The complaint alleges that Rambus and certain officers and directors violated the federal securities laws by making false and misleading statements and omissions concerning Rambus' improper and undisclosed practice of backdating options given to Rambus executives.
Due to the ongoing independent investigation of past stock option grants, Rambus cannot finalize financial results, other than revenues, for the second quarter.
On July 19, 2006 Rambus announced limited financial results for the second quarter of 2006. Total revenue was $48.9 million, a record for quarterly revenue that had just been set last quarter at $47.2 million. The $48.9 million was about the midpoint of the range given as guidance last quarter. Revenue was up 22% over the second quarter last year, and up 3.5% from the previous quarter. This increase was driven primarily by new patent licensing revenues from agreements announced in the first and second quarter of 2006. Royalty revenue was $41.7 million, accounting for 85% of total revenue. Royalty revenue increased 20.5% year-over-year and was essentially flat sequentially. Contract revenue in the quarter was $7.2 million, accounting for 15% of total revenue. Contract revenue increased 34% year-over-year and 29% sequentially.
Expenses were in line with previous guidance with the exception of a $10 million “bonus” to outside legal counsel.
Harold Hughes, president and chief executive officer at Rambus, said, “Our strong licensing momentum continues to drive record revenue results. While we await the results of the independent investigation being conducted by the audit committee of our board of directors, we remain focused on the fundamentals of the business. Our goals remain to help our customers bring breakthrough products to market while we work to achieve fair compensation for our patented inventions."
On July 5 Rambus announced that it has signed a new patent license agreement with Toshiba Corporation. This agreement grants Toshiba a license to Rambus patents for SDRAM and DDR SDRAM memory controllers. Rambus has 500 patents worldwide and another 500 patents pending.
On July 7 Rambus announced it had signed a new patent license agreement with Matsushita Electric Industrial Co., Ltd., commonly known by the brand name Panasonic. This five-year agreement, with an effective date of October 1, 2005, grants Matsushita a license to Rambus patents for SDRAM and DDR SDRAM memory controllers. Rambus will receive royalty payments based on the shipment of these memory controllers.
In April 2006, a jury ruled that Hynix violated Rambus patents on memory chips and ordered it to pay $307 million. Hynix filed for a reduction on the award. The judge rejected Hynix's appeal but gave Rambus the choice of accepting a lower award of $133 million or having another damages trial.
On August 2, Dow Jones MarketWatch reported that Rambus Inc. shares plunged move than 25% after US antitrust regulators said the company "unlawfully monopolized" four markets for computer memory chips. In a unanimous vote, the Federal Trade Commission ruled that Rambus used deceptive conduct "to distort a critical standard-setting process" for dynamic random-access memory, or DRAM. "Through its successful strategy, Rambus was able to conceal its patents and patent applications until after the standards were adopted and the market was locked in," said the FTC, which charged Rambus in June 2002 with violating federal antitrust laws. Shares of Rambus tanked $4.33 to $12.65, furthering a downward spiral that began in mid-April, when the stock hit an annual high. John Danforth, senior legal advisor for Rambus, said the company plans to appeal the decision, which reversed a February 2004 order by a FTC chief administrative law judge that found the company not liable. "Whether or not this is a major setback will ultimately depend on the remedy phase," Danforth said in a conference call. "We believe we can show our rates are reasonable."