Transcript from Ramtron's 2nd Quarter 1999 teleconference call held Thursday, August 12, 1999.
Comments by L. David Sikes, Chairman and CEO
1.Statements made in the course of this conference call that state the
company?s or management?s intentions, hopes, beliefs, expectations or
predictions of the future are forward-looking statements. It is important to
note that the company?s actual results could differ materially from those
projected in such forward-looking statements for several reasons, including
production slowdowns, higher costs or market weakness. Additional
information concerning factors that could cause actual results to differ
materially from those in the forward-looking statements is contained from
time to time in the company?s SEC filings.
FRAM PRODUCT REVENUE PERFORMANCE
1.Turning to our FRAM business performance, Q2 FRAM revenues were $2.4
million, compared with $875,000 a year ago and $2.4 million last quarter. Of
the $2.4 million, $870,000 was for product and $1.5 million was for
customer-sponsored research and development.
2.
3.Q2 FRAM product revenue consisted primarily of 4K and 16K serial FRAM
sales to a variety of destinations, including our long-standing customers
Ampy, Ademco and Schlumberger. In addition, we shipped RF/ID mass
transit chips to Cubic Transportation Systems during the quarter. At six
months, FRAM product revenue was just shy of what we logged for all of
1998.
4.
5.Our thrust to scale our FRAM product revenue is intensely focused on the
updating of existing products, the development of new products, and the
stepping up of our sales and marketing efforts.
6.
7.Expanding our sales of existing 4K and 16K serial products requires an
update to 3-volt operation. Over 70% of the available opportunities for our
serial products require 3-volt operation. For this reason, we are preparing to
migrate our current serial products to 3-volt at Rohm during the first half of
2000.
8.
9.As far as new products are concerned, with Rohm and Fujitsu as committed
foundries with stand-alone memories either in production or very close to
production, we are now able to turn to new product development. To that
end, we are planning to introduce 4 new products during the next six
months, including a 64K serial and the first product in a whole new area --
FRAM-based nonvolatile logic. Nonvolatile logic fits into our three-pronged
strategy, which, as a refresher, includes: stand-alone memory; value-added
memory; and application-specific products.
10.
11.Nonvolatile logic falls under the application-specific product thrust.
Application-specific products incorporate dedicated functions using FRAM
memory technology to solve specific customer problems. These products
provide expanded sales opportunities and higher margin than stand-alone
products, and diversify our revenue stream in competitive environments.
12.
13.To execute on these new product designs, we are in the process of beefing
up our design resources. We have a number of open positions in the
company right now, with a fair number in the new product design and layout
area.
14.
15.Our stepped-up marketing and sales efforts are beginning to bear fruit --
producing several new design-wins. Over the last six months, the marketing
organization has identified and begun work on two cable modem programs;
two automotive programs, including electronic instrumentation and airbags;
a factory automation RF/ID program; and a business telephone application.
These programs are in the early prototype stages, with production
shipments currently scheduled for the fourth quarter and into fiscal year
2000. In addition, we recently began an on-line advertising campaign on the
premier electronic engineering site, Questlink, and our FRAM marketing
director is headed on a press tour beginning next week.
16.
17.Regarding other developments, we have had a few questions regarding
Samsung's recent announcement that they are readying a 4-meg 1T/1C
FRAM for sampling in December. Some are asking what our relationship is
with Samsung, and whether or not this is a threat. Remember that Samsung
is a licensee of Ramtron. Although we have not provided technical
assistance in the development of their 4-meg product, we will be entitled to
royalties on their gross sales of FRAM products under our license
agreement, and Samsung has asked us to work with them in marketing this
product.
18.
19.We are continually encouraged by these types of announcements. Earlier
this week, our foundry, Rohm, announced their intentions to pursue
field-programmable gate array technologies with embedded FRAM. It is clear
that players like Rohm and Samsung see tremendous value in emerging
FRAM technology.
20.
21.On the subject of R&D programs, our work with Fujitsu is pressing forward,
and most of the new equipment has been installed. Our photo area has been
transformed from an area with ample free space to one jam-packed with
modern processing and photo equipment. Beyond Fujitsu, we are continuing
to solicit additional programs to new potential partners on a regular basis.
22.
23.I'll end the FRAM discussion on the topic of licensing. We are currently
aggressively pursuing several FRAM licensing opportunities, and we have an
objective of closing two this year. Greg Jones, our president and COO, has
been traveling extensively over the last two months working ongoing
discussions.
EDRAM REVENUE PERFORMANCE
1.Now turning to the EDRAM business, EDRAM revenue for Q2 was $2.9
million, compared with $4.9 million a year ago and $3.2 million last quarter.
The sequential decline in sales was due primarily to our continued
dependence on the 4-meg as the business's primary source of revenue.
2.
3.Despite the lower revenue, the EDRAM unit produced an approximate 5%
net operating profit during the quarter.
4.As seen in the numbers, the 4-meg continues to sell at a steady pace, with
very attractive margins. In addition to our 4-meg sales, our Internet-based,
64-meg HSDRAM sales were approximately $200,000 during the quarter.
5.
6.Remember that the market for HSDRAM, at least for now, is limited to the
overclocker and high-end PC gamer folks, because it?s a leading-edge
133MHz product. Sales of the HSDRAM continue to increase, as we just
completed our first $100,000 month in July. Sales of our 16-meg were
negligible, due to delays in production volume. We are now actively
promoting the 16-meg in the market and expect sales progress during the
second half.
7.
8.Going forward, we are molding Enhanced Memory Systems' strategy around
four business segments: proprietary DRAM products; SRAM replacement
products; e-commerce/mainstream products; and licensing.
9.The focus of our proprietary product business is to develop low-latency
DRAM products, using our proprietary technology, which go beyond the
performance capability of mainstream DRAMs. Current products in this
segment include our 4-meg EDRAM and 16-meg ESDRAM. In addition, we
are developing a 64-meg version of the ESDRAM and are in the planning
stages for double-data-rate, or DDR, and DDR2 EDRAM products. There are
many applications that require a DRAM-like pin-out but need specialty
DRAM performance. Being a leader in low-latency DRAM technology, we
have the ideal solution for these applications. Based on the longevity and
high-value aspect of this business, we believe that continuing to build on the
success of the 4-meg is well worthwhile. During the next six months, we
expect to make revenue progress in this area, as our 16-meg ESDRAM
opportunities turn into production orders. Further, we are anticipating the
availability of our 64-meg product during the first half of next year.
10.
11.Next, our SRAM replacement thrust is to team with a strategic partner to
develop pin-for-pin SRAM replacement products. A number of factors,
including our own market research, indicate that this is a potentially lucrative
opportunity for our technology. SRAM suppliers are beginning to feel the
pressure of the declining SRAM market and are looking for ways to maintain
market share. For this reason, we are targeting our partnering efforts toward
top SRAM producers that are interested in leveraging our proprietary
low-latency DRAM technology to create drop-in SRAM replacements. These
products would rival the speeds of conventional SRAMs, but at a fraction of
the cost. In a potential partnering situation, Enhanced Memory would provide
its DRAM IP and know-how, and our partner would provide its marketing
expertise and access to a rich SRAM customer-base. We are currently
working live opportunities in this area and hope to close an arrangement
during the second half of the year.
12.
13.Moving on to our e-commerce and mainstream segment, here we plan to
expand our presence in Internet retailing and the distribution of mainstream
high-performance PC memory and related products. As discussed earlier,
we began this effort during the second quarter with the introduction of three
64-meg HSDRAM memory module products. We intend to expand our
Internet-based retail product offerings as well as supply whitebox PC makers
and PC OEMs as PC133 gains momentum in the marketplace. We are
encouraged about opportunities in this area for several reasons. As
predicted, PC133 looks like it will enjoy a place in the mainstream market. It
is believed that Intel will announce PC133 support later this month, and VIA
is moving ahead aggressively with the introduction of their Apollo Pro PC133
chipset. In addition, the recent introduction of the AMD Athlon, a challenger
with front-side bus compatibility up to 200MHz, further bolsters our
enthusiasm for the top-end PC market.
14.
15.And, finally, the strategy for the licensing segment of our EDRAM business
is made possible by our solid DRAM patent portfolio. As alternative
solutions to Rambus are gaining a foothold in the market, the timing is right
for us to capitalize on our low-latency DRAM IP for mainstream DRAM
markets. We do not want to be a supplier in this market, but a source of
technology for commodity DRAM makers. This strategy would allow us to
participate in the commodity DRAM market without the usual risks.
CONCLUSION
In conclusion, it's been a challenging six months for Ramtron and its stockholders.
With the distraction of the recent financial restructuring behind us, we look forward
to the next six months with renewed enthusiasm. As the market's requirements
continue to reinforce the necessity for both our FRAM and EDRAM technologies,
we remain very optimistic that both will have an important role in the evolution in the
semiconductor industry. Our challenge is to take our technologies to the next level,
not only in their capability, but their commercial potential as well. Rest assured
that each and every employee of this company is totally committed to the
company's objective of taking its place not only as a technological leader in the
industry, but also as a commercial success.
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