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longvanilla,
Let me see if I can provide a little insight as to what this agreement means. First a little history.

In November 1999 Rambus was granted patents on memory and chip to chip communications technology. These patents were applied for as early as 1990. Rambus maintains that the current technology used in SDRAM and DDR Ram infringes on many of their patents.

Apparently, late last year Rambus began negotiations with a number of memory manufactures regarding payment for use of their technology in SDRAM and DDR ram. Hitachi was the only one to break off negotiations. In January of 2000 Rambus sued Hitachi for patent infringement. In addition Rambus requested the ITC to ban the import of certain Hitachi products including the Sega Dreamcast.

Althouth there is a great deal of information regarding the lawsuit one point relevant to this discussion is that Hitachi requested that the Rambus complaint be expanded to include all memory manufacturers. The manufacturers responded indicating that they had no desire to join the suit.

The announcement late Thursday of the agreement between Toshiba and Rambus is apparently the results of negotiations that must have begun 6 months ago. Although Toshiba already has a Rambus license it is for RDRAM, the new agreement allows for Toshiba to pay royalties to Rambus for all SDRAM and DDR ram produced beginning April 1 2000.

Rambus has indicated that Toshiba currently has only 5% of the SDRAM market, so the additional income to rambus from Toshiba is not huge. So what's the big deal? Well if you've been following this soap opera you would know that there has been much resistance for adopting RDRAM as the next memory standard for PC's. Intel has selected it and is trying to lead the industry toward it. RDRAM is apparently more difficult to build and test. New equiptment and processes are needed and yields are rumored to be low but improving. Supply is short. It's much more expensive than SDRAM and unless you're running the right applications in your PC, you probably won't see much of a difference in performance. AMD has not embraced it (yet), and has indicated that it will be supporting a different memory type DDR.

DDR is basically a faster SDRAM with a peak bandwidth just below RDRAM (RDRAM has a higher sustained bandwith however). DDR probably won't cost anywhere near as much to produce as RDRAM and can provide similar performance for today's processors and applications. So DDR has been viewed by some as serious competition to RDRAM. DDR systems are supposed to ship this year but none have been seen yet. A possible sceneraio might be that DDR becomes more dominant than RDRAM which would have cut into Rambus revenues. It will also take some time before RDRAM enters into the very low priced PC market displacing SDRAM. Supplies of RDRAM are currently tight keeping prices high.

Soooooo, being a Rambus bull (i'm long on the company), I'm looking beyond the small amount of revenue gained from Toshiba, and more toward the implacations of the agreement. You gotta believe that Rambus laid out their patents and case as to why they deserve royalties for SDRAM and DDR. You gotta believe that Toshiba's legal and technical staff took a lot of time to look carefully at the situation before signing the agreement. So it doesn't look good for Hitachi. In the conference call yesterday, Rambus's CEO indicated that they are currently at various stages of negotiations with other memory mfgrs. I read into that that there will be other agreements beginning in the next few months. This will place additional pressure on Hitachi to settle the suit. And here's the really good part. Rambus has indicated all along that their goal in the suit has been to prevent Hitachi from manufacturing anything with Rambus Technology. If Hitachi doesn't settle, they'll be betting the farm. The whole enchalida! That's a big risk. Personally I don't think they'll take it.

Therefore, it's beginning to look like Rambus will get royalties on 100% of the memory market. Regardless of the type of memory produced. They have indicated in the past that they expcet the PC memory market to be only 35% of future revenues. The other 65% coming from chip to chip communications. That aspect of the business is beginning to ramp up and in a year or two will probably be contributing much to the bottom line.

Oh and one other thing. Yesterday, they announced their next generation of Rambus technology which simply stated doubles the effective bandwith of the current RDRAM!

Sorry for rambling on so long. I hope I've painted a clear picture of a rather complex situation. I've left out a lot of detail. Now I gotta go cut the grass. Yuuck!
bj

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