Forbes: "Rambus Investors Lose Their Minds"
forbes.com
>>>Rambus Investors Lose Their Minds
Arik Hesseldahl, Forbes.com, 03.16.01, 5:05 PM ET
NEW YORK - If its stock performance over the last two days is any judge, investors in Rambus sure are a nervous bunch.
After losing almost 32% in stock value, shares of Rambus (nasdaq: RMBS - news - people) fell yet again today, on news that a federal judge had ruled against the tech firm in its patent lawsuit against German memory chipmaker Infineon (nyse: IFX - news - people).
The ruling from U.S. District Court Judge Robert Payne in Richmond, Va., may have been one of the hottest downloads on the Internet, but it certainly doesn't spell doom for Rambus. For what has become a holy war for the soul of the computer memory chip business, the battle has just begun.
Since it's early in the trial process, Payne's ruling is a just minor setback for Rambus, and not the wide-ranging defeat investors seem to think it was. The judge placed limits, to Infineon's advantage, on the definitions of several key technical terms and how they will be used in the trial. But if this is the way they react to legal news about that company, then it's going to be an interesting year as its three separate patent lawsuits against Infineon, Micron Technologies (nyse: MU - news - people) and Korea's Hyundai, go forward.
All three cases are incredibly complex. The Infineon case deals with four patents and 57 separate intellectual property claims. Payne reduced the number of claims to eight.
Rambus, which designs fast computer memory technology, doesn't itself manufacture anything. It licenses its memory designs to chipmakers who pay Rambus royalties, which account for 70% of its revenue in its most recent quarter. The company claims it has patents on basically every kind of PC memory being manufactured today and has bent many manufacturers to its will.
Its flagship design, known as Direct Rambus DRAM, isn't part of any of the lawsuits. But it hasn't yet generated as much as the company had been hoped from memory manufacturers. Rambus DRAM chips are more complex and more expensive to manufacture than conventional memory. But if you want to make memory that goes with Intel's (nasdaq: INTC - news - people) Pentium 4 processor, RDRAM is as yet, the only game in town.
Seeing a chance for additional revenue, Rambus, threw down the gauntlet by asserting patents on an alternative to Rambus' technology known as Double Data Rate DRAM, and on the older standard memory known as synchronous DRAM.
Infineon, Micron and Hyundai have said "no deal." Already selling memory chips at miniscule margins, they're resisting Rambus' efforts to add a new cost. The result is three lawsuits, one each in federal courts in Virginia, Delaware and California, which will ultimately decide if the Rambus claims are valid.
If Rambus prevails, it stands to collect royalties estimated at between 1% and 2% on the entire $30 billion DRAM market. For Infineon, who sold $3 billion worth of computer memory last year, that could mean payments to Rambus of between $30 million and $60 million. For Micron and Hyundai, it would mean even more.
"Rambus is looking at this as a one-way revenue stream it can count on forever," says Steve Cullen, analyst at Cahners In-Stat Group in Newton, Mass.
But if Rambus loses, it will be limited to collecting royalties on its RDRAM memory, and whatever else it develops, which include memory technologies for video game consoles and networking gear.
Says Dan Scovel, a chip analyst with Needham and Co. in New York, "The question is whether Rambus will take over the DRAM world, or if it will remain this nice little company with a nice little business model."<<< |
