This seems odd...Did anyone read this article? Toward the end of the article, she mentions the Hitachi suit as being unresolved...and Peck agreed w/her?
shoddy writing :)
Rambus Won't Gain Critical Mass Without
Intel
July 28, 2000
By DONNA FUSCALDO
Of DOW JONES NEWSWIRES
(This story was originally published late Thursday)
NEW YORK -- Rambus Inc.'s (RMBS) stock has been under pressure
since Intel Corp. (INTC), its biggest cheerleader, announced that it would
support a non-Rambus memory standard for its upcoming Pentium 4 chip.
And although Rambus doesn't view Intel's announcement as a major
concern, at least one analyst is questioning the company's future.
Rambus' outlook has basically been a function of Intel's support, said Drew
Peck an analyst at SG Cowen. If Intel is backing off it raises red flags.
"Nobody is willing to buy Rambus at a huge premium unless another
company, like Intel, influences (the market) with its support," said Peck.
Not even Rambus' Chief Financial Officer Gary Harmon will argue about
the price difference between its technology and standard dynamic random
access memory (SDRAM) technology, but that's about all Harmon will
agree with Peck on.
In an interview with Dow Jones, Harmon said that currently its technology
that speeds up dynamic random access memory (DRAM) chips costs 50%
by late next year and by that time "Rambus will be much more
competitive" and will be more widely used, he said.
Rambus' technology costs more than the current technology for SDRAM
therefore it is used in the high-end of the market, said Harmon. As more
and more DRAM manufactures make Rambus, like any technology, costs
will come down and price will come down, he said.
All Rambus does is license the design so it is not up to them to reduce
prices, said Peck. In order for Rambus to keep prices down the volume
will have to increase, the SG Cowen analyst said. Currently, noted Peck,
the technology is used in small quantities.
The success factor for Rambus was that the world's largest chip maker
supported its technology, Peck said. "If Intel supports other technology
than Rambus may never hit critical mass."
Harmon, on the other hand, disagrees. "The bottom line is I don't see any
change in plans for Rambus to become the standard DRAM technology,"
said Harmon.
Rambus' chief financial officer is betting that when its product price comes
down, in time for the roll out of Intel's Pentium 4, Intel will choose to go
with Rambus' technology.
Rambus' technology will provide 30% improvement over SDRAM, he
said. "Intel is in a fight with Advanced Micro Devices Inc. (AMD) Athlon
processors and to show off how good (the Pentium 4 is) Intel will need
Rambus."
Intel's announcement Wednesday, said Harmon, is a sound back up plan
for the chip maker, but no one to cause concern.
Using s SRDAM is not a back up plan, said Michael Sullivan a spokesman
with Intel. We are introducing a Pentium 4 processor later this year with a
chip set that only uses Rambus memory and in addition Intel has plans to
develop another chip set that supports SDRAM, he said.
Intel moved to offer the SDRAM chip set because its customers believe
that SDRAM will be helpful in meeting the lower system price points, he
said.
"Rambus RDRAM memory is well suited to getting the maximum
performance potential out of the Pentium 4," said Sullivan. "If RDRAM
moves down in cost over time that is a positive in terms of being able to
enable lower price systems also using RDRAM." Sullivan said Intel is
looking forward to that happening in the future.
As reported, Intel, Santa Clara., said the first release of its Pentium 4
microprocessor and the related 850 chipset, expected later this year, will
still work only with high-speed Rambus memory chips.
The chip maker, however, added that at the request of personal-computer
makers, it has decided to manufacture a Pentium 4 chipset that will support
lower-cost, non-Rambus chips as well.
So is the end on the horizon for Rambus if it looses Intel's support?
"If you asked me that question a month ago I would have said absolutely,"
said SG Cowen's Peck. But the fact that Toshiba Corp. (T.JOS) an
Hitachi Ltd. (HIT) agreed to pay Rambus royalties for conventional
memory has caused the debate to shift. All of a sudden it wasn't whether
Rambus designed DRAM is going to be the primary memory technology,
but if every memory maker will have to pay Rambus royalties.
Back in June, Toshiba said it would pay Rambus a license fee and
royalties for patents for the fundamental aspects of high-speed memory
interfaces that Rambus invented. In analysts eyes, the Toshiba agreement
strengthens Rambus' pending patent infringement case against Japan's
Hitachi. Rambus filed two suits against Hitachi earlier this year to prohibit
Hitachi's sale of certain memory and microprocessors.
The royalties fees, said Peck, will save Rambus.
If the courts rule in Rambus' favor and force conventional memory
manufactures to pay the company royalties, Rambus will survive but in a
different way than management anticipated, he said.
"If the courts rule against (Rambus) the outlook is questionable," Peck
added.
"The landscape has changed," said Harmon. The story was how much of
the total market can Rambus get and now its how much can it collect in
royalties from the other half of the market, said Harmon.
Although Harmon doesn't know how much revenue the company will get
from royalties, he did note it could be as much as Rambus makes with its
technology. Either way Harmon is convinced that come time for Intel to roll
out its Pentium 4 chip, Rambus' DRAM will be there.
Shares of Rambus finished the trading session down 11.7%, or 8 13/16,
at 66 11/16, on volume of 8 million shares. average daily volume is 16.3
million shares.
-Donna Fuscaldo; Dow Jones Newswires; 201-938-5253 |
