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Technology Stocks : Rambus (RMBS) - Eagle or Penguin
RMBS 106.81+2.0%3:59 PM EST
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To: Brian1970 who wrote (24238)7/7/1999 9:59:00 PM
From: kash johal  Read Replies (3) of 93625
 
Brian1970,

Re:"Wow, the ol' betamax analogy is being trotted out against you - twice in fact! I still miss beta... Anyway, Kash Johal, can you please explain to me what you mean by "end-user delta in pricing." Is delta some kind of shorthand for "price markup"? Or are you meaning something else?"

First re: BetaMax scenario, yes it was interesting to see the desperation some of the longs are basing their hopes on.

By end user delta in pricing, I think you hit the nail on the head. If the OEM pays $300 for an item. He makes say 50% gross margin so he sell the end widget for $600.00. In the PC market the margins are in the gross margins are in the 25-35% range. Then the retailers/disiti will add another 10-15% markup as well.

My point is that today you can buy say a loaded PIII 450 for say $1500 from gateway. The 500Mhz part is $1800 say. And the PIII 550 is $2100 all using PC100 SDRAM.

Now when RDRAM comes on line the consumer can go RDRAM with the PIII 450 for $1800(assumes a $300 end user delta for RDRAM), $2100 for the PIII 500 and $2400 for the 550 device.

Now consumers do have budgets and say the budget is $2100. I find it unlikely consumers will buy the PIII 500 with RDRAM over a PIII 550 with SDRAM UNLESS there is a performance difference due to the RDRAM.

The numbers are even worse if the end user delta is greater than $300 for the RDRAM.

Frankly, I have seen benchamrks that show neither PC133 SDRAM nor 800 Mhz RDRAM offer much in the way of performance gain over PC100 SDRAM, so memory bandwidth does not appear to be the major barrier that is slowing folks down on their PC's. And in quite a few benchmarks the Celeron (which uses 66Mhz memory bus) is awfully close to PIII devices at equivent clock speeds with its 100Mhz bus and memory.

Anyway hopefully I answered your question.

Regards,

Kash
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