Hi all; Fortune cr@ps on Rambus:
RAMBUS A Hot Stock's Dirty Secret
Remember when chip company Rambus was the talk of CNBC? Now it's been laid low--by its own duplicity and greed.
Nicholas Varchaver, Fortune, July 9, 2001
As attempted billion-dollar heists go, this one was unobtrusive.
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No, Rambus' problems have come not from the passing of an economic bubble but from its embrace of two age-old sins: duplicity and greed.
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While Rambus was monitoring the proceedings, routinely updating its patent applications with concepts such as programmable latency, one of its lawyers was growing concerned. The attorney told Crisp, the company's JEDEC representative, that even an intentionally misleading silence about patents at a standards body could lead a court to void the patents.
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But what nobody counted on was a series of technical snafus at Intel. Rambus' technology may have been fast, but it was cumbersome to implement. And, says analyst Dean McCarron of Mercury Research, "Intel didn't perceive the market and political realities."
The market reality was that Rambus technology was expensive. The political reality was that the company had alienated many chipmakers.
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On Wall Street, the company's new patent strategy drew cheers. "Rambus has the long-term potential to become the most powerful intellectual-property company on the planet," raved Morgan Stanley analyst Mark Edelstone to the Wall Street Journal last March. (Edelstone did not return FORTUNE's calls seeking comment.)
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At the Infineon trial, the heart of Rambus' defense was that it had never stolen ideas. Au contraire: Rambus argued that it had turned to patents in self-defense because other companies were trying to steal its ideas--which Rambus had shared under nondisclosure agreements--and convert them into a "public domain" version of Rambus' design. Never mind that Rambus, one of the most aggressive companies around, never mentioned those alleged thefts at JEDEC, let alone accused any company there of violating its nondisclosure pacts.
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The judge hearing the Infineon case, Robert Payne, concluded that Rambus' patents hadn't even been infringed. If other courts adopt his interpretation, Rambus will have virtually no way to prove that other companies infringed either. That could cost Rambus a significant chunk of its revenues, seriously imperiling its growth prospects.
Court cases are never over till they're over, of course. But things are looking mighty gloomy for Rambus. To reverse its defeat in the Infineon trial, Rambus will probably have to get both the jury's fraud verdict and the judge's patent and infringement rulings overturned. It's not impossible, but it's a very tall order, and one that's likely to consume lots of time and money--with no guarantee of success. Rambus currently has plenty of cash on hand, but its legal fees devoured a scary 23% of its revenues last quarter. Shareholders will tolerate that kind of bleeding for only so long. (Asked about Rambus' legal fees, Kanadjian answers only, "Rambus is committed to protecting its [intellectual property].")
As FORTUNE went to press, the judge in the Infineon case was planning to hear post-trial motions on July 6 that could bar Rambus from pursuing a second case against Infineon in Germany, due to go to trial in late July. And testimony suggested that at least one of Rambus' SDRAM licensees may be released from its contract should a judge rule essentially that Rambus' sleazy behavior deprives Rambus of its rights to wield its patents. What's more, Rambus is being investigated by the Federal Trade Commission, which is looking into Rambus' actions at JEDEC, according to two lawyers involved in the Rambus litigation. That is no idle threat. In 1996 the FTC charged Dell with hiding patents from a standards body and ordered the company to give up the patents in question. The FTC is also investigating Sun, which settled a suit earlier this year involving similar allegations.
Was Rambus' goal to monopolize the entire DRAM industry? Or was the company just seeking to raise the costs of using SDRAM as a way to force people to use Rambus technology? Industry observers differ. But they do agree on one thing: The Rambus campaign was an act of unparalleled hubris. The company was profitable, but that wasn't enough. Says one chip executive: "They got greedy."
fortune.com
-- Carl
P.S. Thanks to csharan on TMF for the link:
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