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Monday May 12 3:25 PM EDT
Rambus aims to speed memory chips, IPO looks hot
By Eric Auchard
NEW YORK, May 12 (Reuter) - Rambus Inc ( rmbs ) is betting it can define the next generation of computer
memory chips with a technology that speeds the graphics-handling capacity of PCs by processing data up to four
times faster than current chips.
Wall Street agrees. The price to buy into Rambus' initial public offering, due this week, has been raised to $10-$12 a
share from $8-$10.
The Mountain View, Calif., firm plans to offer 2.75 million shares, or about a 12.8 percent stake.
1/8LUGG.CN 3/8 RMBS.O
Due to its hot prospects, the stock should jump about 10 percent at its market debut, analysts said. The IPO is
tentatively scheduled for Wednesday, according to Morgan Stanley & Co.
Officials at Rambus have said its technology will come to dominate the market for PC main memory chips, which
account for 50 percent of overall computer memory chip consumption.
"Our goal is to have half the world market by 2000," Rambus Chief Executive Geoff Tate told Reuters in an
interview last autumn.
Rambus is backed by a star-studded list of investor heavyweights like Microsoft Corp Chairman Bill Gates and Dell
Computer Corp founder and Chairman Michael Dell. Both men have invested "millions," Tate told Reuters.
Rambus has licensed its technology to a majority of the world's top makers of dynamic random access memory
(DRAMs) chips. It derives a royalty stream that amounts to a small percentage of the price of each chip.
This could amount to a vast earnings stream for the firm once large volumes of products based on the new chips ship.
"With exponential growth, we expect we could be close to half the world market," Tate said last autumn, speaking of
a plan to see Rambus-based memory chips form a majority of world production in 2000.
Rambus technology allows DRAM chips to transfer data at up to 600 megabytes a second, significantly faster than
other available techniques. The company does not build chips itself.
The technology can multiply the capacity of existing DRAM memory chips, as well the emerging class of larger
DRAM chips capable of handling 64 and even 128 megabytes of memory.
For now, Rambus has targeted customers building products for the high-end multimedia systems market, but it is also
aiming at the high-volume market for personal computers.
The company has a pact with Intel Corp to develop a version of its technology for use in Intel chips. The deal gives
Intel a warrant to buy up to a million shares of Rambus at $10 a share.
The main rival to Rambus's technology is Synchronous DRAM (SDRAM), developed by an industry consortium and
used by a variety of chipmakers.
Tate told Reuters that Rambus technology offers memory chip processing capabilities 2.5 to four times greater than
that offered by SDRAM.
Current Rambus customers include NEC Corp 6701.T , SGS-Thomson Microelectronics NV STM.PA , Mitsubishi
Electric Corp 6503.T , Hitachi Ltd 6501.T , Samsung Electronics Co Ltd 64050.KS , LG Group's [LUGG.CN ]
LG Semicon unit, Oki Electric Industry Co Ltd 6703.T , Hyundai Group's [HYGR.CN ] electronics unit, and
Toshiba Corp 6502.T .
Rambus is heavily reliant on Toshiba, which accounted for 83 percent of Rambus revenues in the first half of fiscal
1997, according to its prospectus.
The Rambus technology is used to multiply the processing speed of products like Nintendo Co Ltd's 7974.OS Ultra
64 video-game machine and Creative Technology Ltd's CREA.SI Creative Labs add-in graphics cards for PCs.
The technology also ships in workstation graphics systems from Silicon Graphics Inc .
Ram,bus says Microsoft Corp uses Rambus-based chips for its three-dimensional graphics software system called
Talisman.
Besides Gates and Dell, other financial backers have included Mohr Davidow Ventures , , Merrill Pickard , Integral
Capital Partners and an arm of investment bank Goldman Sachs.
Merrill Lynch & Co is the lead underwriter of the Rambus IPO, which will give the company a market capitalization
of roughly $236 million. Hambrecht & Quist Inc and Robertson Stephens & Co are co-underwriters.
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