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

To: mishedlo who wrote (56857)	10/6/2000 5:11:01 PM
From: mishedlo	Respond to of 93625

An interesting post from Doug on the FOOL To waikikiguy Interesting post. Disclosure: I am long Rambus; don't own or short MU. Since MU has sued Rambus, I have been looking much more closely at its positiona sn business strategies. Like you I think MU may not be long term viable, but for different if related reasons. MU appears to be undercapitalized. It is not generating enough income to adequately capitalize plant expansion and upgrades to new process technology as needed to stay cometitive in the main memory markets. I was interested to learn recently that they are focusing more on Flash, and specialty RAM products. These can be made with existing Fab technology. Of course MUs basic tactic has been to delay acceptance of new technologies such as RDRAM which would require significant development and capital expense in order to compete. MU was fortunate enough to receive a $500 M investment from Intel a couple of years ago. This has enabled them to stay current and competitive in the SDRAM business. They have focused on DDR as their future mainstream product because they expected it to be a minor upgrade to existing SDRAM from a process and development point of view. That is it was cheap and easy to do it. DDR has taken over on the Graphics Memory products because it works and can be manufactured, and it is fast. However it only works well when soldered directly to the board and accessed over very short lines. It is not cheap in this niche application. So far no MM has been able to transfer DDR's low cost and high speed potential to the PC MOBO business where larger memories, expandability, and longer traces are needed. Apparently this combination leads to noise and instability. I'm not saying that the problems won't be s solved, but sof far MUs decision to pursue the low csot strategy has put them at risk. They will need to scale back dramatically if DDR fails, aiming at <10% of the total market in one to two years as SDRAM scales down. Alternately, MU will have to be recapitalized. That probably means the Potato King will have to be bought out. The Company's assets are limited engineering talent, Fabs (designed for the current generation of SDRAM) and a (likely) slipping position in leadership memory products (SDRAM, a position in a couple of niche products: graphics DDR, and Flash, and a focus on one end-of-life former mainstream memory (EDO). The FABS are worth something. The DDR and EDO niches have little interest going forward. Falsh is a growth market with big players including Intel, and several specialty players. All of these are spending to expand production and engineering efforts to meet growing demand for larger Flash memory chips. MU probably has not yet burned its bridges re: RDRAM, but it is far behind Samsung and others and it will take a lot of (scarce)resources to catch up. It has also alienated many customers and supporters. Even if MU decides to change its ways, it will not be easy to turn their image, much less their engineering, production and sales teams around. MU is not gone yet as its recent quarter shows, but it is entering a critical transition point. SDRAM will slowly fade over the next two years to be replaced by what? Either RDRAM and its successors, or DDR followed by DDR-2. If DDR fails to reach the PC market successfully Micron may fial along with it. The lawsuits will prove to be merely a backdrop. MU has put all of its chips on DDR and DDR-2 with only niche success (Graphics) so far. The lawsuits and FUD campoign as well as MU's bogus RDRAM announcement last spring, have been designed to prevent an RDRAM ramp up and thereby buy time for DDR. The window is about to close on DDR with the ramp of the P4, PS2, HD-TV, VCRs and Camcorders, etc. RDRAM is becoming unstoppable. Lower prices will follow. DDR must climb though the window soon. JMHO DougK99