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

To: r.edwards who wrote (70251)	4/15/2001 9:19:32 PM
From: Dan3	Read Replies (2) \| Respond to of 93625

Re: without the legal expense rmbs would have beat estimates! The nice thing about having almost exactly 100 million shares outstanding is that it makes per share calculations easy. $5 million in legal expenses were expected - 5 cents per share. $7 million in legal expenses were taken - 7 cents per share. That works out to 2 cents per share "surprise" due to legal costs. Rambus missed by 3 cents (11 cents expected, 8 reported). It's been clear for some time now that Rambus Inc. greatly underestimated the legal difficulties it would face in trying to get the major players in this industry to accept Rambus's demands. That their legal expenses are surprising management and blossoming out of control is not something I take to be a positive sign for Rambus. If their legal costs had come in as expected, they'd have missed by 1 cent instead of missing by 3 cents. IMHO, the long term prospects for Rambus are falling for another reason, as well. The density of memory chips is increasing at about twice the rate of per-machine memory demanded. Even in good times, memory chips have sold in the range of $10 to $12. And the memory companies make nice profits at those prices. But each generation puts 4 times as many bits on each chip, while demand tends to about double in the same period. So the total value of the chips needed by the market is cut in half (for a given number of PC unit sales. PC sales are growing at something like 15% per year, but the number of memory chips needed per PC is dropping 50% every 18 months. So, long term, it looks like the total value of the memory market is dropping fairly rapidly instead of rising fairly rapidly. Remember several years ago when every PC needed several SIMMS or dimms each of which had 8, 16 or even 32 chips on it? The current generation of all memory types (SDRAM, DDR, and RDRAM) is putting 128 or 256mbits per chip so 128 meg of RAM requires just 4 or 8 of those $10 chips (sometimes selling for a lot less than that these days) and 256 meg of RAM fits on 8 or 16 chips. A year from now a DIMM with 4 512mbit chips on it will provide 256 Megabytes of Ram - for an OEM cost of $48 if things go well for the memory industry, and $24 if things are similar to the way they are now. 2 32x16M SDRAM chips on a DIMM would provide 128 meg of RAM for $15 to $25. All the blue sky 5 year Rambus demand forecasts assume that they will collect royalties of about 2% of a rapidly growing memory market - and the actual behavior of the industry is just the opposite. The Rambus "tax base" is shrinking rapidly - and most of the rambus valuations assume the opposite. Meanwhile, a Rambus loss in court could make the stock nearly worthless pretty much at a moment's notice. Regards, Dan