Hi Paul Engel; Thanks for looking up the Intel Rambus warrant figures. It was calculated as a percentage of total INTC cpus, correct? Presumably at the time the cpu gets into the hands of a consumer? If it is instead calculated as a percentage of Intel chip sets, than Intel could get exercise a lot sooner, just by suppressing its own non-RDRAM memory controllers.
Anyway, I seem to recall that the size of the warrant was 1 million shares. So INTC would currently be in the money on that option for something like $50,000,000. While not chicken feed, this isn't such a big number, especially when you consider what Intel's expenses in pushing Rambus have been.
As to what kind of earnings Rambus would have if their technology went out with 20% of Intel's processors, I'm certainly no expert in memory as a business, but my guess is that the total figures wouldn't be as sweet as what a lot of people are guessing.
There are some problems with the way most Rambus bulls do their numbers on this:
(1) Non-Intel processors aren't flocking to RDRAM, or forced to go there. In fact, it appears that Intel is having to sacrifice market share in order to drag Rambus along. As an AMD stock holder, I think this is a great thing!!! Maybe after Intel beats itself up completely with Rambus, that $50 million from the in the money warrant will look pretty good! Of course, that will be after they have lost the cpu race to AMD! (Make it so!)
(2) Rambus's natural market is machines needing low granularity. This is contrary to Intel's attempt to force Rambus on the high end, which will fail miserably, in my opinion. I agree that the Timna is a more natural user of Rambus. Anyway, this means that RDRAM's percentage of memory market will be less than RDRAM's percentage of Intel's chip set business. (I.e., Rambus is getting the dirty end of the stick.)
(3) Rambus's revenues are currently bloated by license income. While it will be nice to increase the royalty revenues, there will also be some decrease in the quite substantial license income. Right now, I think license income is something like 80% of their income. This was all income that Intel forced the rest of the industry to pay Rambus, and they really don't want to do it again, which leads to:
(4) The Rambus revenues are not going to be on-going. That is, after this next wave of technology, Intel will exercise its Rambus warrants, and never deal with the company again. The memory makers are going to say goodbye as well. This is pretty clear from the trade press, and will happen largely within 5 years. Incidentally, the Rambus insiders know this, and are currently putting together as many patents as they can so they can extend the life of the company. Unfortunately for them, the rest of the industry knows it too, and is also putting together patents.
So work out the numbers and surprise me with your estimate of Rambus' royalty revenues. What are they getting, 1% or 2% of sales? Is that a percentage of wholesale prices or retail prices? What about companies that manufacture for their own use, if any?
-- Carl |
