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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Jdaasoc who wrote (45108)	6/19/2000 3:58:00 PM
From: Don Green	Read Replies (1) \| Respond to of 93625

Rambus Patent Claims May Greatly Affect Semi Industry (06/19/00, 7:49 a.m. ET) By Mark Hachman, Electronic Buyers' News Once a curiosity, then an upstart, and more recently a controversial player, Rambus emerged Friday as a company that could prove to be the tollbooth of the semiconductor industry. Analysts expressed shock at Toshiba's concession to Rambus' claim that it essentially owns the fundamental rights tothe SDRAM memory interface used by the majority of the semiconductor industry. Indeed, Toshiba's decision could have a profound impact on a wide range of companies, as Rambus (stock: RMBS) prepares to conduct similar licensing deals with memory and logic companies alike, according to observers. Essentially, Rambus, Mountain View, Calif., has successfully laid claim to a fundamental tenet of computing. All logic devices manipulate data in memory, the majority of which are not embedded but consist of discrete chips using a synchronous memory interface. The list of companies that may have to line up at Rambus' door could include the entire DRAM industry -- which researcher Dataquest, San Jose, Calif., is projecting will record revenue of $36 billion this year -- as well as any company that designs products that directly interface to synchronous memory. That includes makers of PC chip sets, graphics chips, embedded controllers, I/O hubs, and networking components, among others. "Our patents are pretty fundamental," said Rambus CEO Geoff Tate on Friday at a press conference to announce Rambus' next-generation memory interface technology for the consumer market. "I think it's likely to say that most companies will violate these patents." Tate said Rambus will initially seek out royalties from DRAM vendors because a large number of DRAM chips will typically connect to a single chip set, providing a lucrative target. He said between five and 10 companies are "in active discussions" with Rambus, either evaluating the patents in question or negotiating similar licenses of their own. "We're reviewing with individual manufacturers what patents we have, what patents they have, and why they require a license," Tate said. "It may take a couple of months." Under the licensing agreement Rambus strikes with all of its partners, the licensee is responsible for tallying and then reporting the amount of Rambus chips sold during the quarter. Under what are typically five-year agreements, Rambus then records the revenue during the following quarter. Under Rambus' default contract, Direct Rambus royalties are between 1 and 2 percent per chip. Under its new agreement, Japan's Toshiba will pay an even higher, undisclosed royalty for sales of double data rate memory. Tate said Toshiba could be asked to pay royalties of 3 to 5 percent for memory controllers or for products that include a controller interface. Toshiba's concession comes at a time when Rambus is engaging in a broader effort to try to enforce its patents against Japan's Hitachi (stock: HIT) in court, both in front of the International Trade Commission through a petition with the Department of Commerce and in a civil court in Germany. Tate said he expects a response by either the ITC or the German court before the end of the year. According to Tate, Hitachi asked other DRAM manufacturers to stand with it in a show of solidarity, but all refused. Several came to "kick the tires" of Rambus' patents instead. "If they were going to be innocent bystanders, they figured they were going to need to be proactive," Tate said. Analyst Sherry Garber of Semico Research, Phoenix, said she cannot really grasp the ramifications of the deal until the industry has a chance to react. "I was stunned," Garber said. "I mean, it's like Rambus and Toshiba said the [ITC] suit didn't mean anything." Whatever the outcome, Rambus has refused to engage in the cross-licensing deals prevalent in the industry today. Such deals dilute the value of the 85 patents issued to Rambus in the United States, including additional claims that have yet to be verified, executives said. "We have no interest in cross-licensing because we have no interest in the patents of others," said Avo Kanadjian, vice president of marketing at Rambus.