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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Pescador7 who wrote (9147)	10/20/2000 10:49:11 PM
From: Pescador7	Respond to of 65232

Another great post also from G&K: To: tinkershaw who wrote (33414) From: tinkershaw Friday, Oct 20, 2000 3:06 AM ET Respond to Post # 33416 of 33459 "when you find your servant is your master" Beautifully expressed and exactly describes what I inferred in my first post on the subject a few days ago. It is becoming uncertain who exactly is the head ape. If gorillas always subordinate the value chain to lower value fruit then inarguably it has to be Rambus. Rambus has near 100% gross margins and over 50% operating margins last quarter and added something like $36 million in cash off of revenues of only $26.9 million -- for those not counting, that is a CASH FLOW MACHINE, more cash than revenues. If Rambus gets through the lawsuits they will be one of the most risk-free investments around. The only thing that will topple them is some technology disruptive to RDRAM. The only serious competition in this regard is DDR-II. DDR-II, at best, is planned to begin being planned around 2003. But if you look at DDR I wouldn't hold my breath. In addition, by 2003 all the DRAM MFG. will have invested billions in RDRAM manufacturing equipment and RDRAM will have become the status quo that the industry will fight against changing. From what I've seen of the INTC chip road-map they are looking at 6 ghz chips within the next few years. Only, I repeat ONLY RDRAM of all commercially viable technologies today (and unviable ones including DDR-II, assuming it could come out in droves and cheaply in 2004) is capable of not bogging down processors such as this. So I guess what I'm saying is that when you look at the technology, the value chain, and the lack of alternatives, as well as the price of RDRAM falling quickly (within 15% of SDRAM by next year, 20% in 2001) you are faced with an industry doing its best to resist the emergence of a gorilla like the industry has never seen before. A gorilla with cash flow that even Gemstar can envy. All this said, this is certainly RMBS' moment of battle, either they complete the war and take the kingdom, or not. It looks nearly inevitable, absent a surprising legal decision, that they will own the kingdom. To mine eyes the nearest analogy is Rambus as the British and Intel as the arrogant French at the battle of {darn it I hate when I forget names Traulfallgher, or something of that kin} anyways, 13th century where the upstart British, on French soil, outnumbered by some large number, out armed to a very significant degree, defeated the much superior French army by use of archery and disruptive military tactics, forever changed the balance of power between the British and French. Tinker P.S. Like most of you, my heart says hold with trepidation, but my head says why worry. I'm going with my head because that way is paved with gold and I'd be really pissed to spot all the signals of a new mega-gorilla in town and stayed on the sidelines through a 10+ bagger in the coming year or two and onward from there. P.P.S. I was even tempted to go 75% Rambus, but decided with the value of CREE (which has 4 potential discontinuous innovations in its stable, lighting, blue laser, power amplifiers for base stations and radar, and power chips), and with IRF (hmmm, maybe I should do a report on these guys, the world's oldest surviving semiconductor company whose proprietary products (30% of revs this quarter) are in an indisputabel tornado with what looks like sustainable growth for the coming decade at least. It is selling so cheap because it is converting from its former commodity business (currently 70% of revs) into a proprietary power chip vendor with sole source contracts for things like Pentium IV, electric steering in automobiles, Play Station II, many cellular phones, routers, et al. THIS IS A BONUS MINI-REPORT! Anyway, back on subject, but I decided with the litigation risk (which I think is the last thing in RMBS' way from confirmed gorilla hood) that going 75% RMBS was not the best thing to do at this time given the alternatives.