RMBS--Rambus Rides Again!
Rambus yesterday signed its fourth memory chip (DRAM) technology licensing deal covering most types of DRAM. Rambus and NEC, the world's fourth-largest DRAM maker, also announced they will jointly develop the next-generation Rambus technology. Rambus contracts now cover 22% of the DRAM market and four out of the 10 top DRAM makers. It's high-stakes poker for the holdouts.
By Tom Jacobs (TMF Tom9)
September 13, 2000
Rambus (Nasdaq: RMBS) scored a key licensing deal last night with NEC, the world's second-largest semiconductor maker. NEC will not only pay royalties for Rambus's technology, but also for two other competing technologies. The Rambus contracts now corral four of the top 10 DRAM makers and 22% of the DRAM market. The temperature's rising for the holdouts.
Four DRAM makers down, six to go
The top 10 DRAM makers all have licenses with Rambus for its RDRAM technology, which speeds up communication between a PC's memory and controller (or logic) chips. But four of the 10 have signed broader agreements requiring royalty payments to Rambus for most types of DRAM: RDRAM, the current standard SDRAM, and promised Double-Data Rate SDRAM (DDR). For more on Rambus's business, find the Dueling Fools take here.
Sign or be sued
Rambus's strategy is to sign 'em or sue 'em. When Hitachi didn't deal with Rambus, it sued Hitachi in U.S. federal court, at the U.S. International Trade Commission (ITC), and in Germany. Infineon balked, Rambus sued. After Micron (NYSE: MU) and Hyundai demurred, they sued Rambus first (click here for the Micron story). Their suits seek to prevent Rambus from charging royalties not only for SDRAM and DDR, but from RDRAM itself. Rambus fired back its own cases in France and Germany, throwing in a complaint against Hyundai in the ITC.
German courts and the ITC move to trial much faster than U.S. federal district courts. By suing Micron and Hyundai in Europe and Hyundai at the ITC, Rambus may have regained the litigation advantage.
Here's the playing field today:
Global DRAM Sales RDRAM, SDRAM
1999 ranked by % and DDR deal
1. Samsung 24% no deal, no lawsuit
2. Hyundai 20% no deal, lawsuits
3. Micron 17% no deal, lawsuits
4. NEC 10% deal
5. Infineon 8% no deal, lawsuit
6. Toshiba 8% deal
7. Mitsubishi 4% no deal, no lawsuit
8. Fujitsu 3% no deal, no lawsuit
9. Hitachi 3% deal
10. Oki 2% deal
TOTAL 100%
[Source for ranking: Semico Research Corp.]
Among the holdouts, Samsung is King Kong: If it signs or sues, it's major. Smaller Mitsubishi is reportedly in talks with Rambus, while Fujitsu joins Samsung in silence. Waiting may mean that Rambus can dictate tougher contract terms to them.
Micron and Hyundai risk the most: Rambus has stated that it will not license to those it beats in court. If Rambus honored its existing RDRAM contracts with them, it could still cut Micron and Hyundai out from the SDRAM and DDR SDRAM markets. By signing now, NEC may not only have scored better terms, but also snares an agreement with Rambus to jointly develop the next generation of Rambus technology. Sweet!
Of course, a big win in the courts for Micron or Hyundai would alter the landscape dramatically. And Rambus hasn't won yet. Yes, it's sewn up 22% of the DRAM market, but the DRAMurai who own 78% of the market are watching or working the lawsuits and biding their time. Foolish investors interested in Rambus (including me, a Rambus shareholder) should continue to evaluate what the returns are for Rambus whether it eventually rules most DRAM, or just RDRAM alone.
Your Turn:
Can RDRAM alone sustain Rambus's current market cap? How significant will Rambus's RDRAM revenue stream be from games, HDTVs, and set-top high-definition digital satellite broadcast boxes -- shipping in time for the Olympic Games, by the way. How many more deals before Rambus declares victory? Will one loss be fatal? Enough questions! Post your answers on the Rambus discussion board! |
