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Technology Stocks : Broadcom (BRCM)

BRCM 54.67

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Feb 9 4:00 PM EST

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To: Patsy Collins who wrote (2451)	8/17/1999 9:35:00 AM
From: grok	of 6531

RE: Rambus The thing to remember is that they sell an architecture that can make memory chips talk to microprocessor chips faster. Up to today they've been selling design services to their customers (ie, the Dram makers) to install the Rambus architecture on Drams and they've been profitable at this. However the real money will come from royalties on the sale of the Drams (called Rdrams) and this starts in September as Intel ships their new Pentium III called Coppermine with a new chip set called Camino which supports Rdrams. The Rambus CEO said yesterday on Sqwauk Box that he expects to capture 50% of the Dram market in several years. Rambus may collect something like 1.7% royalty on this 50%. The Dram market is expected to grow to over $40B during this time. So $40B x 0.5 x 0.017 = $340M of royalty income. The interesting thing is that Rambus spent less than $9M last quarter and the engineering to enable this royalty stream is all done! So the royalty is pure profit. What is ROE? Warning: If you look into this you'll find that there is plenty of controversy about it.

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