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Technology Stocks : ADSP - Ariel -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (2259)	5/23/2002 9:05:18 PM
From: Bilow	Read Replies (1) \| Respond to of 2263

Hi Jorj X. McKie; Yeah, but it will take 2 to 5 years. The income problem is that the industry quit starting new designs using their chips in late 1999 and switched to DDR. That's why the preponderance of new designs now being delivered has switched over so strongly to DDR; it takes as long as 30 months to grind a chip design out. I should comment on the Rambus IP model. First you get engineers to design your part in. While they're doing this, you charge them "contract" revenue. When the design is in production, you charge royalties on the units produced. In this model, if the company is failing you will see a drop in "contract" revenues before you see a drop in "royalty" revenues. Here's their most recent 10-Q/10-K figures (thousands): Period Contract Royalties FY99 $35,353 $ 8,017 FY00 $39,763 $32,628 FY01 $21,797 $95,363 ... 1Q02 $ 3,084 $21,780 (ended December 31, 2001) 2Q02 $ 1,722 $21,809 (ended March 31, 2002) biz.yahoo.com edgar-online.com You can see that the trend in falling contract revenues is accelerating, as one would expect with Intel's dropping their technology. Royalties are topping off, but they'll inevitably follow the contract income with about a two or three year lag. Also note that royalty income is delayed by 3 months, so the above March figures date to before Intel introduced DDR in January 2002. The next report will probably show declining royalties as well as contract revenue. The expense problem is that they're up to the neck with lawsuits, and they do not have a good history in court. The worst was that they got convicted of fraud (see #reply-16211630 for instance, in a lawsuit that they started, and in which they were offered a "status quo ante" agreement just before the trial began) and are now appealing the verdict. That's highly unlikely to be reversed (it was a jury verdict, and the same appeals court has already stripped Rambus of their attorney-client secrecy privilege by the "crime-fraud" exception), and it gives teeth to the class action shareholder lawsuit filed against them, which is the major difficulty. The lead plaintiff in the shareholder lawsuit just happens to be the same organization that took $259 million out of COMS (see #reply-16979197 ). During the time (i.e. class period) that management executed the fraud, management sold stock like it was going out of style, and the company's stock lost $10 billion. Typical awards are between 2.5% and 10% of the lost market capitalization (see #reply-16526175 for links to a Stanford paper), but since they only have about $200 million in the bank, that should be enough to bankrupt them. They have another class action lawsuit, this one in favor of people who bought over priced memory because of Rambus' actions (see #reply-17409951 ), but I don't think it will amount to much. The memory makers are smelling blood and two of them (Micron and Infineon) have hired top notch legal talent with the intention of extracting as much cash as possible from them for the attempted fraud. Micron's guy Hynix is also going against them, but not as hot. Kenneth Starr is pleading the appeals case for Infineon (see #reply-17485522 ). Micron's guy is famous for big awards, but I can't find a link to him. He was mentioned in Forbes. -- Carl