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To: Daniel Chisholm who wrote (2150)	2/16/2000 2:54:00 PM
From: Stewart Whitman	Read Replies (2) \| Respond to of 4691

> What's the size of the worldwide memory market? I'm on really shaky ground here, but let me SWAG it at $25B Not a bad guess..., DRAM market (which is what you want) was... $19.8 billion in 1997 $14 billion in 1998 According to: hea.com

To: Daniel Chisholm who wrote (2150)	2/17/2000 9:08:00 PM
From: jhg_in_kc	Read Replies (2) \| Respond to of 4691

how do RMBS numbers work? I asked around. <<jhg, here are few responses you can give, if the technology hold, then we are talking a minimum of 7 years (SDRAM life time from 1995 to 2002?). The total volume of DRAM, will be much larger than $25 billions, some estimates are as high as $60 billions in three years, I have about $40 B in three years. RMBS keeps 100% of the revenues, they do not have "gross margins" and their fixed costs will not increase with revenues that much. They get 1.7% on drams, but higher percentage on other devices such as DSP, ASIC etc. There is still a little controversy I was not able to clarify and that is the pronouncement of Tate that PC will be just 35% of their revenues, but I am not sure how much non PC revenues are DRAM revenues (like RIMMs, ASIC, controllers in HDTV, chipsets controlling drams etc.). Finally, I believe they are already working on next generation system post the first 7 to 10 years we discussed. Last, this market is no longer valuing companies based on discounted future cash flow, at best on a PE of future earnings, so, if you take sometime in the next four years, shipments of $30 Billions of RDRAM on which RMBS gets about $500 pretax and $300 MM after taxes, you get some $12/share earning without the non dram royalties. You make some assumptions on the rest (like double it) and apply to that a "then market multiple" and you'll see that $500/share is not so outrageous after all. Zeev..>> go to RMBS thread for further info. This is not the place, it seems.

To: Daniel Chisholm who wrote (2150)	2/17/2000 11:26:00 PM
From: jhg_in_kc	Respond to of 4691

to daniel chislom and whoever else may be interested: this 11/98 report is what got me started on RMBS. I must correct my earlier post. I didn't buy this stock two years ago, that would have been Jan. 1998. I bought it in Nov. 1998. In any case, see how this stands the test of time. All posts of mine are meant to advance knowledge, despite how we bludgeon each other from time to time. <<< Monday, December 7, 1998 6:44 PM ET Reply # of 37298 ** Hambrecht & Quist Hambrecht & Quist Hambrecht & Quist ** Company: Rambus Incorporated Price: 94.28 Recommendation: BUY Notes: a, b,f Firm: Hambrecht & Quist Department: Technology Industry: Semiconductors Date: 12/7/98 ESTIMATES Q1 Q2 Q3 Q4 FY '99 EPS 0.08 0.09 0.09 0.12 0.39 '99 REV 10.0 10.0 10.0 12.0 42.0 '00 EPS 0.16 0.21 0.28 0.37 1.03 '00 REV 15.0 19.0 24.0 30.0 88.0 REV EST IN MILLIONS RMBS: Re-Initiating Coverage with a BUY. * We are re-initiating coverage of Rambus with a BUY rating. * Chip-to-chip interface speed limitations are increasingly becoming the limiting factor in system performance. Rambus' technology addresses this fundamental issue by allowing semiconductor memory devices to keep pace with faster generations of processors and controllers. * In our view, the Rambus high speed memory interface has a high probability of becoming the next generation standard for PC motherboard applications as well as other high volume applications. * The issue for Rambus is not "if" but "how quickly" the standard is adopted. Intel remains on track for the ramp of its use of Direct RDRAM in Q3 of 1999 with the sampling of the Camino chip set and the Katmai processor (P2 with MMX2). * Revenue growth is driven by widespread market adoption and increased sales in the DRAM market. Earnings growth will benefit from high margin royalty revenues and licensing fees with relatively small R&D and SG&A spending. * For FY1999 (Sept), we expect $42 million and $0.39. On a calendar year basis,we expect $38.5 million and $0.30 for 1998 and $47 million and $0.46 for 1999,representing earnings growth of 98% and 54%, respectively. For Q1:F99, we expect $10 million and $0.08. For F2000, we expect $1.03 and $88 million. We believe that revenue and earnings growth of 50-100% is sustainable for the next 3-5 years. OVERVIEW We re-initiate coverage of Rambus with a Buy. Rambus' business model offers the best of all worlds: the probability that they will become a dominant standard in a large and growing market (DRAM) which in turn will drive rapid top line growth and tremendous operating leverage. This has given Rambus a very high valuation based on 314 times CY98 estimates, 205 times CY99 estimates, and 70 times CY00 estimates. Thus, the company is clearly being valued on its strong fundamentals and its likely status as a defacto standard for DRAM. We expect the news on Rambus to continue to be positive, providing a positive backdrop for the stock. COMPANY Rambus Inc. designs, develops, licenses, and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of consumer electronics, computer systems and other electronic systems. The company's technology cost-effectively increases the data transfer rate, or "memory bandwidth", allowing semiconductor memory devices to keep pace with faster generations of processors and controllers and thus support the accelerating data transfer requirements of multimedia and other high bandwidth applications. The company licenses semiconductor interface technology and markets its solutions to systems vendors to encourage them to design Rambus interface technology into their products. INVESTMENT THESIS The memory interface is increasingly becoming the limiting factor in system performance. Regardless of how fast a microprocessor runs, the system performance is limited by the data transfer rate into and out of memory. Rambus' technology addresses this fundamental memory bandwidth issue by allowing semiconductor memory devices to keep pace with faster generations of processors and controllers. The Rambus solution provides a high performance and cost-effective high-speed chip-to-chip interface technology for increasingly bandwidth hungry applications. End markets that require a high speed memory interface include computer graphics, computer main memory, digital video as well as broadband communications. The Rambus standard is gaining momentum as the next generation high speed memory interface standard. The dominance of Direct RDRAM is essentially guaranteed by Intel's endorsement. Intel is the leading company in defining the next generation PC platform. With the last few hold outs--most notably Micron and AMD--moving toward the Rambus standard, it appears that it is only a matter of time before Direct RDRAM becomes the industry's standard DRAM configuration. Intel is supporting the Rambus standard. Rambus is the standard of choice for next generation PC main memory. Intel clearly chose the Rambus standard for its next generation memory interface and is actively encouraging the memory suppliers to do the same. We believe that part of the reason Intel invested in Micron was to ensure that the largest supplier of DRAM in the world was also an active supporter of Rambus. Intel's endorsement of Rambus will drive rapid growth of Rambus' royalty revenue as it starts to penetrate PC main memory applications at the end of 1999. The Rambus business model has tremendous leverage. Rambus generates revenue through a combination of contract fees and royalties. Licensees generally pay a license fee to Rambus ranging from a few hundred dollars for a narrow license covering a single logic product to millions of dollars for a license with a broad coverage of Rambus Technology. Royalties are generated as a percentage of the revenue received by licensees on sales occurring during the life of the particular Rambus patents. Royalty rates range from 1-2.5% of revenue for RDRAMs to 3-5% of revenue for logic chips. The licensing business model essentially eliminates manufacturing costs leaving only R&D and SG&A expenses. Thus, as revenues grow, most of the incremental revenue falls to the bottom line. Rambus' leverage to the DRAM market will drive exponential growth. Rambus is likely to see rapid adoption of its technology as it is adopted in PC main memory applications. We expect the penetration rate to rise from 1% in 1998 to 20%-30% or more by 2000-2001. Moreover, the DRAM market is near the end of a 3 year downturn. The MOS DRAM market has declined from $41 billion in 1995 to an estimated $13 billion in 1998. We believe that it is likely that the DRAM market will return to its prior levels as supply and demand come back into balance and price erosion returns to a normal rate. Thus, Rambus will not only benefit from a rapid penetration but from growth in the underlying revenues upon which its royalties are based. We re-initiate coverage of Rambus with a Buy rating. We believe the company is a market penetration story and a leverage play on the growth of the DRAM market. In addition, the company's business model offers compelling leverage. On a calendar year basis, we expect $47 million and $0.46 for 1999 and $108 million and $1.34 for 2000, representing earnings growth of 54% and 192%, respectively. PRODUCTS AND MARKET POSITION PC Main Memory: The Holy Grail In the memory market, being the standard on the PC motherboard is everything. Roughly two thirds of all DRAM are consumed on the PC market and most of that is on the motherboard. Once a type of DRAM becomes the standard on the motherboard, sheer volume drives that variety to become the lowest cost alternative--and hence the most popular alternative for all other applications. Winning the motherboard socket ensures domination in the DRAM market. We believe that there is little doubt that Rambus is the standard of choice for next generation PC main memory. Intel clearly backs the Rambus standard for its next generation memory interface and is actively encouraging the memory suppliers to do the same. We believe that part of the reason Intel invested in Micron was to ensure that the largest supplier of DRAM in the world was also an active supporter of Rambus. Intel's endorsement of Rambus will drive rapid growth of Rambus' revenue royalty as it starts to penetrate PC main memory applications at the end of 1999. The issue for Rambus is not "if" but "how quickly" the standard is adopted. >>>

To: Daniel Chisholm who wrote (2150)	2/22/2000 8:11:00 PM
From: jhg_in_kc	Read Replies (1) \| Respond to of 4691

<Hello jhg, re: RMBS, OK, so let's assume RMBS is a "toll bridge", and will be successful. How do the numbers work?> This is how they are working, up another 40 points today or 31%. Several more manufacturers of chips (and Sony Playstations II) now paying that "toll." I had said I thought RMBS would be at 300 by end of the year; it will probably be there before the first day of spring. People are now saying "another QCOM" and "stock of the decade" And to think I discovered it all on my own, looking for a little Buffett toll bridge <g> p.s.fyi. When Sony Corp's PlayStation2 game console hits store shelves next month, the samurai warriors and battling monsters it brings to Japanese homes may become the advance force for an Internet revolution. Although the much-anticipated PlayStation2 will not offer Internet access capability until next year, analysts see huge potential for the machine eventually to rank alongside, if not outclass, mobile phones and personal computers as a major online platform for Japanese consumers. Sony plans to use the PlayStation2 to distribute game software, then music, then movies and a vast array of electronic goods directly to consumers online. And that doesn't even include the possibilities for Sony's newfound interests in online banking and stockbreeding. ``It's hard to quantify just how much impact PlayStation2 will have on e-commerce. All we can say is that it will likely be incredible,' said Katsuo Hori, an analyst at International Data Corp.>> Every play station made is a royalty to Rambus jhg