From **** Hambrecht & Quist ****
Company: Rambus Incorporated
Price: 76.19
Recommendation: BUY
Notes: a, b,f
Firm: Hambrecht & Quist
Department: Technology
Industry: Semiconductors
Date: 2/24/99
Q1 Q2 Q3 Q4 FY
1998 A 0.06 0.07 0.07 0.07 0.28
1999 E 0.08 0.08 0.08 0.09 0.33
2000 E 0.15 0.24 0.31 0.40 1.40
Current Price 76.19 ** 52-Week Range 36-110
Market Cap 1,897 ** Shares Out 24.9
Book Value $1.88 ** Net Cash/Share $2.03
3-Year EPS Growth _____ ** 0.33 1.40
42.6 96.0 ** 0.40 1.40
The Message from Intel: Committed to Rambus
Synopsis - At the Intel Developers Forum in Palm Springs yesterday, Intel
reiterated their commitment to the Rambus architecture as the next generation PC
main memory standard. Intel identified a 3-4 month slip, to the end of Q3 1999,
in meeting internal timing goals for getting RDRAM platforms ramped up in volume
production. The clear message was that Intel does not believe this will
significantly impact the adoption outlook for RDRAM in 2000 and beyond.
Rambus Update at Intel Developers Forum (IDF). At the twice annual IDF in
Palm Springs, Intel executives briefed the development community on the current
status of Rambus DRAM (RDRAM) ramp up, the revised Intel memory roadmap and the
key challenges facing the industry in the transition to RDRAM. The lead Intel
spokesperson was Peter MacWilliams, Intel Fellow at the Intel Architecture Labs.
Commitment to Rambus:Overall, Intel reiterated both its short and long-term
commitment to transitioning the PC industry to RDRAM as the only next-generation
PC main memory standard. The company reiterated its rationale for choosing
Rambus over the competitors, including DDR and 133 MHz SDRAM. In Intel's
opinion, only Rambus has the technology headroom, the system performance and the
system cost characteristics to be the right choice as the primary
next-generation PC main memory architecture.
Current RDRAM Status. Currently 8 RDRAM suppliers have silicon. Though none
are in full compliance with the specification, Intel believes that several are
"very close" to demonstrating full compliance. Fifteen manufacturers have
committed to RDRAM, and combined these account for over 95% of current DRAM
capacity.
Revised Roadmap. Intel has identified a delay in receiving compliant parts,
including RDRAMs, Clocks and RIMMs, from suppliers, which will push back the
expected platform integration schedule. Though sample platforms are currently
running, the expected date of volume platform availability has been moved back
3-4 months to the end of Q3 1999. Intel plans to launch platforms with 600 MHz
and 800 MHz RDRAMs simultaneously. There are currently no plans, as had been
rumored, for an earlier launch using exclusively 600 MHz RDRAMs. Intel presented
roadmaps that were more or less consistent with versions of the 2000/2001 ramp
shown at previous IDFs. Intel still expects the mainstream PC segment to be
fully converted to RDRAM by Q3 2000. Following this is the mobile mainstream PC
segment which is expected to be fully converted by Q2 2001. Finally, the value
PC segments are expected to convert throughout 2001. Eleven of the 15 RDRAM
suppliers are expected to be in volume production by the end of 2000, according
to recent roadmaps shared with Intel.
The Challenges - Surmountable. Intel identified challenges in getting volume
production of compliant parts for three "ingredients" in the Rambus platform:
RDRAM, RIMMs and Clocks. For RDRAM, the key issue is improving yields for 600
and 800 MHz parts. Contributing factors to the yield issue are limited tester
capacity and the difficulty getting designs centered, due to Rambus using
clock-edge centric design. Intel believes that 3-4 suppliers should have 800 MHz
testers available for RDRAMs by mid-year, helping alleviate the testing problem.
In addition, Intel identified system problems in combining the ingredients, and
is working to solve some technical issues that were not identified during
simulation. Overall, despite these issues, Intel expressed confidence that the
revised volume platform production target of the end of Q3 was attainable with
some cushion.
Recommendation. We reiterate our BUY rating on shares of Rambus. We believe
the outlook for the company is essentially unchanged for 2000 and 2001, despite
the turbulence surrounding a difficult architectural transition.
Rambus Inc. designs, develops, licenses, and markets high-speed chip-to-chip
interface technology to enhance the performance and cost-effectiveness of
consumer electronics, computer systems and other electronic systems. The
company's technology cost-effectively increases the data transfer rate, or
"memory bandwidth", allowing semiconductor memory devices to keep pace with
faster generations of processors and controllers and thus support the
accelerating data transfer requirements of multimedia and other high bandwidth
applications. The company licenses semiconductor interface technology and
markets its solutions to systems vendors to encourage them to design Rambus
interface technology into their products.
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