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

To: TimeToMakeTheInvs who wrote (75494)	7/9/2001 11:13:37 PM
From: tinkershaw	Read Replies (1) \| Respond to of 93625

NEC Cutback. Now that is interesting. It means the shakeout in the industry is beginning. Players in this game will have to find new uses for their high fixed cost factories so that they can continue to keep production at full and fully allocate their fixed overhead as best as they can. Looks like NEC is one of the first players to make a major announcement in regard. It should be noted that RDRAM production is not mentioned in this article so we do not know if RDRAM is involved. I would guess not as the article talks about 64 megabit DRAM and dramatically falling DRAM prices. We know from Samsung that RDRAM is still profitable to produce and thus not something NEC would so readily cut as it would SDRAM and DDR. But if more players make moves like this the market price of SDRAM and DDR will have to recover somewhat down the road. This may be Micron's strategy to drive down prices so low that players like NEC completely leave the DRAM market and enable Micron to compete with less players 2-3 years down the road. A risky strategy IMHO, but so was Samsung's to invest so heavily in RDRAM. In retrospect the RDRAM decision seems the more sound but in real-time each company made their bet and are following through on their strategies. It will be very interesting to see how this falls out. Between them I would almost always go with the strategy of innovation as Samsung has vs. attrition that Micron has chosen, but this does seem to be the strategies of the two companies. Tinker P.S. As I've said before, my biggest concern with Rambus at the moment is the depressed DRAM market. First, no matter how much marketshare RDRAM may gain, it limits Rambus' near-term and mid-term earning potential depending on how deep and long this cyclical shakeout drags on. Second, it keeps alternative technologies like DDR and SDRAM at artificially low prices, prices that keep the price differential between RDRAM and SDRAM and DDR at a premium greater than supply/demand equilibrium would dictate. It is debatable how material the price difference between RDRAM and DDR is to total system cost, but nevertheless, all things being equal, cheaper is better.