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

To: MileHigh who wrote (3739)	4/15/1998 7:57:00 PM
From: Mark Rosneck	Read Replies (4) \| Respond to of 93625

MileHigh, Fundamentally, Rambus is one of the few pure plays in the emerging IP (Intellectual Property) business. IP is the buzz word to describe the selling of silicon designs as "cores" that can be incorporated within larger designs (often called Systems-on-a-chip). Technically, I'm impressed that the technology did everything they claimed and that they've succeeded in delivering a third generation product (the original Rambus, Concurrent Rambus, and now Direct Rambus). The commitment to making their customers' successful appears to be excellent (a good thing, too, since this is really bleeding edge stuff). What appeals to me is that here's something that is truly on the edge of technology and it delivers value without causing massive pain to the early adopters. My investment style is generally fairly conservative and long term hold so Rambus isn't something I'd normally get into. However, I think the general industry downturn due to Asia and the oversupply of PCs in the channel is depressing the Rambus stock to a considerable degree. If this is so, then I also believe that it might take a few more quarters before the stock could turn. But I just can't resist jumping in at this low price. Looking at the technology a bit deeper, 800MHz Direct Rambus is 2 bytes wide giving a transfer rate of 1.6 Gbytes/sec (800x2). A two channel Rambus design (which is very typcial, BTW) gives you 3.2Gb/s (2x800x2). Comparing this to SLDRAM, SLDRAM operates at 400MHz so would require 4 bytes for 1.6 Gb/s (4x400) or 8 bytes for 3.2 Gb/s (8x400). The reason this is so important is that pins on devices such as graphics controllers are precious and expensive. Let's say you want to design a brand new leading edge graphics controller with 3.2Gb/s. With Rambus you'll use 32 pins and with SLDRAM you'll need 64 pins to connect to memory. (For clarity sake, I've ignored the control pins which could change things a bit) If you went with Rambus, maybe you could squeeze the design into a cheaper package and make it more price competitive or maybe you could use those 32 pins to add some new features or maybe you could integrate other parts of the graphics subsystem into your chip and making the overall chip count lower to do the same job. The counter argument is that if the memory is cheaper (400MHz parts are potentially cheaper to produce than 800MHz), then maybe the overall design of graphics chip + SLDRAM memory is cheaper than the chip with Rambus memory. And there's those pesky Rambus royalties you don't have to pay if go with SLDRAM. The jury's still out on this one although the designers I've met over the years would kill to save an extra few pins and would sell their souls for 32 pins. Another aspect is that microprocessors connect to memory through chipsets and Intel owns the chipset market. Micron and Via Technologies are both developing chip sets for SLDRAM but for SLDRAM to win, you need both a successful chipset and successful SLDRAM. Just another barrier. In watching the press on SLDRAM, I haven't seen anything from end user customers stating their desire to adopt these devices. From my perspective, the SLDRAM folks are taking a "build it and they shall come" tactic. Perhaps this will happen but I haven't seen any evidence so far. On the other hand, I thought this announcement from Matsushita was interesting since it's another example of how Rambus has applications outside of traditional computing: biz.yahoo.com I have a very interesting report from BancAmerica Robertson Stephens called "Intellectual Property Observations - A revolution is brewing in the semiconductor industry" dated 4/2/98. In it they note that "the Rambus architecture is general enough to permit it to enhance any chip-to-chip communication as has been demonstrated by Rambus' design wins coming from multiple markets: consumer such as game systems, digital television, arcade games; communications such as Ethernet switching ICs, fibre channel ASICs, workstations, peripherals as well as PC main memory and graphics." If you want to try to track down this report, Robertson Stephens is an investment banking firm and their Web site is www.rsco.com. The author of this particular report is Daniel T. Niles (415) 693-3241 dan_niles@rsco.com. I don't know a thing about Robertson Stephens other than I was given a copy of this report and it seemed very well reasoned. So, in summary: ú Great technology ú Great business model in emerging IP technology ú Will enjoy a guaranteed amount of success with Intel ú High barriers to entry for competition ú Opportunities for the technology outside of their initial target market Regards, Mark