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Subject: Qualcomm and Rambus
From: "Geoffrey Moore"
Date: Mon, 26 Jun 2000 08:49:52 -0700

Gang,

I am about to go off on vacation, but wanted to wiegh in on something that
may already have been duly noted, namely the parallels between market
reaction and adoption of Qualcomm and Rambus.  In both cases the companies
showed up with blocking patents in key technologies.  In both cases the
industry required to license these patents has done everything it possibly
could to wriggle off the hook.  In neither case do they appear to have
succeeded.  I just saw a squib yesterday that Intel shut down its "bridge"
chip operation, after losing $250M on it--this was to be a substitute
technology for Rambus.  Now RDRAM is the only supported solution in the
architecture plan, I believe.  This would appear to solidify their gorilla
anchor.

The higher level question for the market is how to value a gorilla once you
have priced into their stock the impact of winning their first market.  This
is the issue of "gorilla adjacency power," the ability of a gorilla to
muscle its way into adjacent markets, a la Microsoft and the browser and LAN
markets.  We know there are plenty of other markets besides the PC where
fast memory will be valued.  The question is, have the value chains in these
other markets consolidated around other standards yet?  If so, can they be
broken back open (normally requires a 10X advantage). If not, can they be
co-opted by Rambus (realizing that once a gorilla is identified, everyone is
an emerging value chain tries desperately to keep them out).

Same issues apply to Qualcomm.

Cheers,
Geoff

Geoffrey Moore
Chairman, The Chasm Group
411 Borel Avenue, Suite 550
San Mateo, CA 94402

Venture Partner, Mohr Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
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