"We Made A Big Bet On Rambus..."

Market Wire, 20050229

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Rambus has been a monthly pick in the past and is currently on our stock watch list. The recent statements made by Intel regarding RDRAM are interesting as they point to INTC's frustration in dealing with a firm that not only innovative technology, but also innovative and very aggressive business strategies.

"We made a big bet on Rambus (NASDAQ: RMBS) and it did not work out," stated Intel's (NASDAQ: INTC) chief executive Craig Barrett Wednesday to the Financial Times. "In retrospect, it was a mistake to be dependent on a third party for a technology that gates your performance." Barrett's remarks come after INTC's recent third quarter analyst meeting.

In the Financial Times article, Barrett also stated that Intel wanted a partner with technology innovator not a company "seeking to collect a toll from other companies." In its most recent suits with Hitachi (NYSE: HIT) and Micron Technology (NYSE: MU), RMBS has asserted that it holds fundamental patents that apply not only to its memory technology, but the broader synchronous memory market, including SDRAM, as well. RMBS also has stated that it will prohibit any company that loses to it in from licensing its memory.

In an apparent move to side-step RMBS, INTC is "seriously" looking at alternative memory technologies including double-data-rate (DDR), which can be viewed as a direct competitor to Direct Rambus technology. "As we have said before, we are adopting DDR technology for servers, and exploring DDR on desktop," stated Paul Otellini, vice president of the Intel Architecture Group. Backing up Otellini's comments, Electronic Buyers' News has reported that several major DRAM producers and module makers have told EBN that they are shipping unbuffered DIMMs to Intel in large enough quantities to validate a DDR chipset.

RMBS's CEO Geoff Tate noted that his company's performance for next quarter will depend on Intel's launch of the difficult to manufacture Pentium 4 microprocessor, Sony's (NYSE: SNE) PlayStation 2 in the U.S. which is currently delayed, pricing of RDRAM against its cheaper SDRAM competitor, and signing additional licensees for RDRAM and SDRAM and compatible ICs.

Going forward RMBS' RDRAM visibility in the consumer electronics market is expanding. Panasonic and Sony next generation HDTV, digital satellite set-top boxes, and VCRs containing high-quality, RDRAM-enabled digital imaging. Furthermore Tate stated that Samsung, Toshiba, and NEC are working successfully to bring the price of RDRAM down relative to SDRAM.

INTC is not known for shooting from the hip when it comes to releasing information, but it's recent negative posturing against RMBS may be a signal that RMBS not only has viable technology, but its memory technology could be a category killer. That fact may be enough for INTC to spew its negative rhetoric.

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