Tish on Tech
Rambus' Life off the Beaten Path
By Tish Williams
Senior Writer
2/11/00 1:48 PM ET
URL: thestreet.com
PALO ALTO, Calif. -- Little hooting. No hollering.
Annual meetings aren't quite as fun when you've gone from hot to not. Rambus (RMBS:Nasdaq) invited its investor faithful to join in the love Wednesday at the Sheraton Palo Alto for its annual shareholders meeting. Once the scorcher of the chip sector, intellectual-property wielding Rambus still has its stranglehold on the memory-chip business. It's still got big daddy Intel (INTC:Nasdaq) in its back pocket -- though Intel's high-profile endorsement and licensing of Rambus' memory and logic-chip technology withstood a bumpy year of product delays and question marks.
But there were no pyrotechnics Wednesday. No hysterical fans, pumping their fists and sharing giddy camaraderie over their gains. No wide smiles following the serious questions.
There was a modest fruit-and-muffin spread, but that's not going to propel the stock over 100.
Life's a little less sparkly when your stock has continuously cycled between the 40s and 90s over your two-plus years as a public company. Rambus' future is potentially bright, if big memory manufacturers start cranking out Rambus-style chips (see Marcy Burstiner's story earlier this week). But in comparison to the sparkly eBay (EBAY:Nasdaq) and Digital Island (ISLD:Nasdaq) -- highly touted young companies whose revenues and stock charts could pounce up steep inclines, given some powerful "ifs" -- Rambus is getting a little old. It's still in the revolutionary business of providing the intellectual property behind memory chips, making money off the design, rather than the manufacturing of chips. But those "ifs" need to become definitive. They haven't.
And so Wednesday, only 50 pilgrims converged on the small Justines conference room of the Sheraton. (Justines probably being a Brazilian term for "outdated '80s tropical decor from hell in the hotel wing that is the last to be remodeled during our renovation.") A fidgety gang of Rambus executives twittered in the corner, dimly lighting up as another comrade entered.
Leave it to the Internet chat room investors to rabble rouse.
With hearty handshakes and early morning guffaws, the chat room guys generated the only energy in the room. They dismissed the gloomy air of the morning with rough-and-tumble greetings.
They swapped chat room "handles" and joked about the questions. Don't picture pallid, nerdy types; these were meaty-handed guys with sun-worked skin -- short sleeves exposing more than a lifetime of keyboard work. One gleefully shouted at his table, "Hey, free pens!"
Shhh, it's time for the presentation.
Rambus' annual report foreshadowed the day's pathos. On flimsy white paper, CEO Geoff Tate penned regrets about the past year. He then outlined a fairly technical description of Rambus' chances against other competitors. Forget the glossy paper, boffo charts and fist-pumping. This was a low-self-esteem affair.
CFO Gary Harmon kicked the speeches off with not one, but two readings of the Safe Harbor disclaimer, the legalese executives utter to cover their backsides before pulling out cheery slides with "forward-looking statements." Double-dose mental note: Don't get your hopes up about any good stuff we mention. He thanked the six assembled Rambus associates -- the lawyers, accountants, etc. -- there that morning. Adjust the head count to 44 faithful, plus the help.
Harmon laid out Rambus' competitive potential, shrugging off rival memory-chip technologies such as double data rate, or DDR, and synchronous DRAM (SDRAM): "If you're hearing 'woe be Rambus,' we've got the best solutions." He took it upon himself to quell any anxiety surrounding the makers of Rambus test equipment, specifically in references to mean, old Teradyne(TER:NYSE). If you're going to make DRAMs according to Rambus designs, you need to buy test equipment to make sure your operations are perfecto. Apparently some bad scrap of humanity insinuated that no one was buying test equipment -- specifically from Teradyne -- meaning that no one was manufacturing Rambus chips.
Harmon calmed the audience as he picked apart the "FUD" (fear, uncertainty and doubt) around Teradyne's sluggish test-equipment sales. "If you've heard that Teradyne hadn't received any orders for Rambus testers and that we shouldn't be doing well," not to worry, because Hewlett-Packard (HWP:NYSE) and Schlumberger (SLB:NYSE) are the top providers of Rambus test equipment lately. "So if you're covering Teradyne, no, you don't see a lot of action."
Step back, you jackals!
CEO Geoff Tate took his turn at the podium with the admission that "it's been a bumpy road in 1999." He reiterated his belief that as PC users demanded higher-speed machines, the PC industry would turn to Rambus. There's the theoretical.
As for the practical, Tate spent the weight of his time outlining the company's current legal action against Hitachi (HIT:NYSE) over alleged patent abuse in less cutting-edge products and the general threats to Rambus' patents. "We are willing to license our technology in noncompatible usage," Tate says, referring to chips that don't compete with Rambus chips. "But we're not willing to let them use our technology to compete against us."
Put down that fruit plate and shout your applause, people!
Tate cautioned the shareholders and the technology community to differentiate Rambus' lawsuit from what he described as the traditional practice of semiconductor companies --suing sector mates but eventually striking cross-licensing agreements. If the matter ends up in court, Tate says, "our intention is not to let Hitachi license our technology." He dryly encouraged shareholders to check out the "riveting reading" in Rambus' 141 patent claims. "Our patent claims are as clear and straightforward as you're going to see."
As the Q&A period crested and fell with a whimper, Tate and his listeners seemed resigned to the fact that Rambus is a company still awaiting that upward wild ride on the hockey stick chart, but now it has the added excitement of an industry siege. "When we were looking for additional lawyers on our patent case, our lawyers reported that all the other lawyers are booked up by other companies studying the Rambus patents," he says.
That's a nice feeling.
As a consolation prize, Tate advised everyone to remember that the chipmaker has a strong relationship with its biggest customer; Intel is planning on treating Rambus like the cherished kept lover it is at its upcoming chip-developer conference, with prime billing; and that in 2000 royalty revenues are expected to jump from 20% to 50% of Rambus' revenue. Finally, the CFO cut off the meeting and the loyal investors crowded the executives for quick one-on-one questions. Those who'd had enough slipped out into the parking lot labyrinth.
Maybe there will be fireworks next year.
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Tish Williams' column takes at look at the people who make Silicon Valley tick. In keeping with TSC's editorial policy, she doesn't own or short individual stocks, although she does own stock options in TheStreet.com. She also doesn't invest in hedge funds or other private investment partnerships. She waits breathlessly for your feedback at twilliams@thestreet.com.
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