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Technology Stocks : Rambus (RMBS) - Eagle or Penguin
RMBS 95.57+0.7%Nov 28 9:30 AM EST
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To: Don Green who wrote (25526)7/22/1999 9:51:00 PM
From: Dave B  Read Replies (1) of 93625
 
Don,

I have no doubts that those users who always need to have the fastest machine FIRST will spend the extra bucks, but that number won't be THAT large in relative terms...and will limit sales for a long time.

We've seen an article today that says that RDRAM costs 20 to 30 percent more to make than SDRAM, but will cost at least double, maybe more. With that kind of premium built in, there will be a tremendous incentive for the DRAM mfrs. to build up RDRAM quickly -- they're always looking for profits (aren't we all!). That production will result in competition, which will bring the price down. Personally, I believe that will actually happen rather quickly, but that's certainly the basis for the arguments we've had lately. If the DRAM mfrs. all try to grab a piece of the RDRAM profits quickly, then the price will tumble (game theory - they'll take reduced profits rather than have it sitting in warehouses) and the premium will end up not being that great. The hard drive and memory businesses have a history of overbuilding capacity and I don't see anything changing in the future.

I agree there is no room for a major misstep. We've had 2 so far -- the Camino slip (which always happens in technology products) and the crashing SDRAM prices, which have made the premium much larger than anticipated. The first was Intel's fault, the second was just one of those market conditions that "happens". We'll have to see what happens next.

Dave
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