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Rambus (RMBS) Frequently Asked Questions Version 1.2

New in this version, aschwebel's Post of the Day summarizing Rambus' advantages, ptnewells additional comments on valuation, psuasskicker's price analysis, acronym finder, Mitsubishi signs on to the Bus, sustainable advantage thread and RB article on sustainable advantage.

Introduction and General Resources

Welcome to the Rambus (RMBS) stock message board. This is supposed to be a forum to discuss anything related to RMBS the stock, the company and its industry sector, including, but not limited to, the Random Access Memory (RAM) market. If you feel compelled to discuss off-topic subjects on this board, first think about whether this is the proper forum for that discussion and if you can't help yourself then at least place "OT" in the subject line to let people know they can skip your message without missing any relevant discussion about Rambus.

Discussion of a technology company like Rambus involves many technical terms, here are some glossary web sites that define many of these terms:
GuruNet -
The Jargon Dictionary:
and also investment terms:
Harvey's Finance Glossary -
Investor Words -
Yahoo! Financial Glossary -

Rambus, Inc. Corporate information can be obtained at their website:

General corporate information can be found here:
(Here you can find general facts about Rambus)


1. Introduction and General Resources
2. Table of Contents
3. What kind of company is Rambus and what do they do?
4. What is the difference between RDRAM, SDRAM and DDR SDRAM?
5. Is Rambus a Rule Breaker Stock?
6. Is Rambus a Gorilla?
7. How do I find the best RMBS relevant information here on this message board?
8. Are there any good summaries of Rambus information?
9. What is FUD?
10. Does Rambus have business momentum and sustainable advantage?
11. How does Rambus make money?
12. Are patents important to Rambus?
13. Is RDRAM important to Rambus?
14. Does Rambus have a strong value chain (customers, licensees)?
15. What are some of the frequently asserted objections against RDRAM?
16. What are some of the risks in regard to Rambus?
17. Is there a good site for news about RMBS?
18. What is the corporate history of Rambus?
19. Where can I find more of these FAQs?
20. Is there a valuation model out there for RMBS?
21. Disclaimer

3. What kind of company is Rambus and what do they do?

RMBS is a designer of random access memory, they hold key patents in RDRAM, SDRAM and DDR SDRAM essential to the manufacturing of these modules. They license their technology to the memory-makers gaining royalty income from their intellectual property.

From their Yahoo! Profile:
Rambus Inc. designs, develops, licenses and markets high-speed chip-to-chip interface technology to enhance the performance and cost-effectiveness of computers, consumer electronics and other electronic systems. The Company licenses semiconductor companies to manufacture and sell memory and logic ICs incorporating Rambus interface technology, and markets its solution to systems companies to encourage them to design Rambus interface technology into their products. 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 supports the accelerating data transfer requirements of multimedia and other high-bandwidth applications.

The thing that differentiates Rambus' designs over commodity RAM is the speed of their interfaces, controllers. It makes no sense to make faster and faster processors if the bottleneck of RAM speed prevents you from seeing any speed improvements in your real life applications. RDRAM aims to cure these bottlenecks.

4. What is the difference between RDRAM, SDRAM and DDR SDRAM?

This great post by überRMBSFool jasonxsmith expains the difference between RDRAM, SDRAM and DDR SDRAM, and how RMBS fits into all of it.
An excerpt from his post:
Rambus gets about 2% from every sale of an RDRAM chip. They make about 3% to 5% on the sale of every controller chip that interfaces to RDRAM (the cost of chipsets is a minor concern though). This is a given. The contracts are in place already.

Rambus also claims they have patents which apply to SDRAM and DDR. The royalties are about 1% for SDRAM and 3% for DDR (since that is considered to be a competing technology). This is still in dispute, although it looks very much like everyone is going to have to pay. Rambus appears to be very confident that they can win in court, and have already moved towards litigation in several instances. Hitachi, Toshiba, and OKI have agreed to pay the royalties, and Rambus is either suing or in talks with Infineon, though we are unclear on the progress there.

Rambus stands to make 1.5% to 2.5% of the revenues on 100% of the DRAM sold worldwide. If the industry grows as expected for the next 5 years, that number will be somewhere in the $60B to $100B range. Run the numbers, compare that to a $7B market cap, and rejoice my child, for you have found one of the most undervalued stocks in the market!

Remember, this is based on DRAM sales alone, and this information is pretty easy to quantify. Now add to that the other applications where Rambus technology is going to be necessary, and the picture gets even better. How much better? Nobody knows, except insiders, and they are not talking. Rambus is working deals now.

Also see this post by jasonxsmith on the differences between SDRAM, RDRAM and DDR:
The CPU cares about how much data it can push through the pipe from the CPU to the memory and back. If the pipe is clogged, not much water flows. If the pipe is clear and wide, lots of water flows.

SDRAM is like a garden hose. You can get enough water through to water part of your lawn, or wash your car. If you need a high pressure wash, you are out of luck.

RDRAM is like a fire hose. It can deliver a lot of water at high pressure. It's overpowered for a lot of the software we use today, but just imagine if your yard suddenly expanded to 100 acres and you had to water it, or if you just bought a 50 yard long SUV that you want to wash in a hurry. That garden hose isn't looking so good now, is it?

DDR is like putting two garden hoses together. You get twice as much water. You still don't get good pressure (DDR bogs down latency-wise when you use it heavily), and you don't get nearly as much water as with a fire hose, but it is a whole lot better than that single hose. You can water twice as much and clean off your old car in half the time.

The AMD board FAQ has a good summary on the different kinds of DRAM:


This is an article about current and future memory standards:

What is SDRAM, DDR-SDRAM, VC-RAM, Rambus Direct DRAM?

This is a link to Dr. Pabst's memory guide
A link to Ars' excellent three part memory guide/tutorial. Part 1 is here and part 2 is here Check ars' website for part 3.
A link to Ace's memory guide part 1, part 2 coming soon, check his page for updates

Paul De Mone will make your head spin with his technical analysis of Rambus memory ;) Although this article is dated, and the memory speed has improved, it is still fairly relevant to Rambus memory, with the basic architecture remaining the same.

And this post offers pro-Rambus and pro-DDR summaries of the debate:
An article about latency in current memory

Please note that AMD does not support RDRAM, so consider the source.

Here's a good post by DougK99 citing some the relationship between Intel and RDRAM and why it is beating out DDR:

5. Is Rambus a Rule Breaker Stock?

jasonxsmith makes a good case in this 3/4/00 post

Brian Lund (TMFTardior) concludes that RMBS cannot be a Rule Breaker because it lacks a sustainable advantage:

I would dispute that, RMBS fits all the Rule Breaker criteria and has the makings of a young Gorilla, and as such they don't always play nice. Yes, RMBS antagonizes its customers, but the thing is that those same customers need RMBS' technology to survive. As long as RMBS' patents hold they will continue to serve as toll collector in the industry.

Tom Jacobs (TMFTom9) writes an excellent response to Brian Lund, making a clear case for RMBS having sustainable advantage:
Is Rambus' Advantage Sustainable?

dieterh makes a very strong case for Rambus being a Rule Breaker here:

To learn more about Rule Breakers you can check out these posts:
Resources from the RB seminar (FAQ)

Summary of RB seminar lessons:

6. Is Rambus a Gorilla?

See this RMBS Gorilla summary by rel4490
also see this TMF post by nilocp that lays out the RMBS Gorilla characteristics:

To learn more about Gorillas (the term is from the book "The Gorilla Game") you can check out the Gorilla Game FAQ:

7. How do I find the best RMBS relevant information here on this message board?

One of the best ways to find the best information on a company here at the Fool is to sort the board by recommendations, you click on the recs link and you get this:
If people recommend the best posts you will read the best information on Rambus, so do your part and recommend the best of the best.

8. Are there any good summaries of Rambus information?

Egilroc posted this awesome summary of Rambus:
College Report on Rambus
I posted this summary of Rambus for a stock research project:
StanleyT1 posted this RMBS summary written by TinkerShaw (who is known at times to be 100% invested in RMBS):
aschwebel posted this brilliant Post of the Day summarizing Rambus' advantages:

9. What is FUD?

Fear, Uncertainty and Doubt.

The trick is to tell real FUD and misinformation about Rambus versus legitimate negative news that might affect the business prospects of Rambus, the debate rages on in this board.

STEVE3232 posts what RMBS' CEO thinks of FUD:

10. Does Rambus have business momentum and sustainable advantage?

RMBS is showing a great deal of business momentum as RAM makers capitulate and accept licensing agreements with RMBS.

Samsung was the latest one:

Samsung joins Toshiba, Oki, NEC (Nasdaq: NIPNY) and Hitachi (NYSE: HIT) as companies that have reached patent licensing agreements with Rambus. Those agreements came after Hitachi capitulated in a lawsuit filed by Rambus asserting its patent rights.
Samsung's addition to that list is huge. It is the world's leading DRAM supplier, with revenues of $4.8 billion and 20.7% market share in 1999. How much money does that mean for Rambus? The companies did not reveal precise terms of the deal, but Rambus typically seeks to collect about 1% of SDRAM revenue and 3% of DDR SDRAM.

From that article:

Global DRAM Sales | RDRAM, SDRAM
1999 ranked by % | and DDR deal
----------------- --------------------
1. Samsung 24% deal
2. Hyundai 20% no deal, lawsuits
3. Micron 17% no deal, lawsuits
4. NEC 10% deal
5. Infineon 8% no deal, lawsuit
6. Toshiba 8% deal
7. Mitsubishi 4% deal*
8. Fujitsu 3% no deal, no lawsuit
9. Hitachi 3% deal
10. Oki 2% deal
TOTAL 100%

Rambus now has license agreements for 51%* of the sales among the top-10 DRAM makers (with the addition of Mistubishi). As Tom noted in his story on the Micron suit:
Companies that don't come to an agreement with Rambus run a grave risk: They could lose their ability to manufacture DRAM at all. With more manufacturers signing up and the downside so great, Hyundai, Micron and others are ever more compelled to play ball.

NEC capitulates:

*Table and percentage changed recently with the addition of Mitsubishi (see the link below).

NEW: Mitsubishi Electric signs licensing deal for SDRAM and DDR:

Now for sustainable advantage, TMFTom9 asks the question here:
Follow the thread for some great responses.
erkaye gives a great response here:
as well as sbannerman (a new poster):
also see these two posts by jayseae

TMFTom9 puts it all together in these 2 articles:
Is Rambus' Advantage Sustainable?

11. How does Rambus make money?

The Fool duel for RMBS makes some great points in this regard, read TMFTom9's Bull argument (and if you must TMFOak's Bear argument):

How Rambus makes money
Rambus doesn't actually make RDRAM, though its engineers developed and patented the technology and are busily advancing it -- even for use in switches and routers for optical networking. Rambus's patents are key: They are legal 20-year monopolies on the invention backed by the U.S. Patent and Trademark Office.
Rambus licenses its technology to memory makers. It even provides engineers to help a licensee implement it. The memory makers then sell to original equipment manufacturers. The company then earns a royalty payment generally based on unit sales of the product containing Rambus's stuff. You can check the earlier links for more information, but we're generally talking 2% to 5% per chip, in a DRAM market estimated to grow from $20-something billion today to between $60 billion and $100 billion in the next three to five years. Not peanuts. Rambus's success in this market depends on market acceptance of RDRAM versus SDRAM and any other DRAM competition.
Rambus asserts that currently dominant SDRAM and the promised DDR SDRAM use technology that depends on Rambus's patents, and any failure to pay Rambus royalties on SDRAM and DDR is illegal patent infringement. Read it again.

This is a big, fat, hairy, monstrous deal: Rambus is negotiating with DRAM makers (and sometimes suing them) to receive a royalty on every SDRAM, DDR SDRAM, and RDRAM chip. It is claiming that its patents cover 99% of the DRAM produced today and likely to be produced in the next few years. If Rambus succeeds, then RDRAM's technical superiority, price disadvantage, or fashion awareness matter not because Rambus gets paid for practically everything DRAM. Do the numbers: Rambus is reported to charge a 1% royalty for SDRAM and 3% for DDR. Estimate 2% of a $60 billion to $100 billion DRAM annual market in three to five years, and you have $1.2 to $2.0 billion for Rambus. This is why debt-free, leanly staffed Rambus could be called undervalued at its current $7 billion market cap, without accounting for any Rambus advances in its technology for the computer market or any royalties for its technology used in networking products.

12. Are patents important to Rambus?

As an intellectual property (IP) company patents are the life-blood of Rambus, without them the company would be worth very little. As of November 200 the patent count stands at 102 U.S. patents.

Sinfonian posted an interesting article on patents and RMBS:
silrw Rambusited some interesting stuff on the Chipworks site. Much more at:

Article 2:

Rambus Portfolio and Licensing Strategies

Rambus has built an impressive array of patents over the past 10 years. Rambus holds 102 US patents as of November, 2000. Their portfolio is a model that young microelectronics companies should consider emulating.

From the latest 10-K (filed 12/23/99):
The Company has an active program to protect its proprietary technology through the filing of patents. At September 30, 1999, the Company held 62 United States patents on various aspects of its technology, with expiration dates ranging from 2010 to 2019 and had applications pending for an additional approximately 90 United States patents. The Company's United States patents do not prevent the manufacture or sale of Rambus-based ICs abroad. At September 30, 1999, the Company held ten foreign patents and had an additional 36 foreign patent applications pending in Taiwan, Korea, Japan and various other jurisdictions. In addition, the Company attempts to protect its trade secrets and other proprietary information through agreements with licensees and systems companies, proprietary information agreements with employees and consultants and other security measures. The Company also relies on trademarks and trade secret laws to protect its intellectual property.

Here's a great article on the power of patents by TMFTom9:

Here's an opinion on the lawsuits against Rambus' patents posted by mishedlo:
HowlOnMoon also weighs in on this issue:

Rambus is in litigation with several memory makers for SDRAM and DDR-RAM in both the US and Europe. These are Micron, Infineon, and Hyundai (and affiliates). Scheduled trial dates in Europe are December 2000 and February 2001. Rambus initiated the European actions due to, as stated by CEO Tate, the speed of the legal processes in Europe is much greater than the US. Also, Rambus has requested a change of venue from courts in California to the east coast. Again, for the stated reason by CEO Tate, to speed up the legal processes.

To date, four large multi-national firms (Hitachi, Toshiba, Oki, NEC) with a global presence have signed licensing agreements with Rambus for IP on SDRAM and DDR-RAM. While these firms are certainly large corporations, they are not the top-tier SDRAM makers in the world. However, they are 4 of the top 10 memory makers in the world. Estimates are that these memory makers manufacture 20-22% of the SDRAM in the world.

To date, Hitachi is the only company to settle an actual lawsuit. It was settled approximately one-month before scheduled trial date. The other, large multi-national memory makers signed licensing agreements with Rambus after examination of Rambus IP.

The outcome of the litigation is unknown at this time. Rambus management, at the recent conference call on earnings, re-iterated that there was nothing new that concerned them in the lawsuits. CEO Tate also stated that the lawsuits were similar to the complaint of Hitachi, which settled out of court.

One may speculate as to the outcome based on known evidence, but many court documents are sealed. The outcome remains unknown at this time.

General Patent Information

13. Is RDRAM important to Rambus?

The answer is YES, but you may be surprised by the prospects of the company if RDRAM doesn't see wide adoption. ptnewell lays it out in this post:

14. Does Rambus have a strong value chain (customers, licensees)?

RMBS is a pit bull, it is using its IP to extract its own terms of surrender from the memory makers, and it is succeeding. They are falling like dominoes. Their value chain runs deep and RMBS management is not afraid to defend vigorously its patents.

Here is

From the last 10K:
At September 30, 1999, Rambus had a total of 31 licensees for the newest generation of Rambus technology. Rambus licensees include fourteen DRAM manufacturers which collectively accounted for over 95% of worldwide DRAM sales in calendar 1998: Fujitsu, Hitachi, Hyundai Electronics, IBM, Micron Technology, Matsushita, Mitsubishi, NEC, Oki Electric Industry, Samsung Electronics, Siemens, Toshiba, Vanguard and Winbond. At September 30, 1999, five of these licensees were shipping RDRAMs. Rambus logic licensees include Advanced Micro Devices, Compaq, Hewlett-Packard, IBM, Intel,
LSI Logic, Matsushita, NEC, S3, Texas Instruments and Toshiba.

RMBS is quickly becoming a Gorilla, just ask Intel, once a solid sponsor of RMBS technology it is now trying to distance itself from its former partner. See this excerpt from Tom Jacobs' dueling Fools:
Semiconductor Rule Maker Intel (Nasdaq: INTC) has decreed that the market will accept Rambus. Intel signed a 1996 agreement with Rambus that commits the giant to use RDRAM in controller chips and to meet certain production and sales targets. The deal includes such carrots for Intel as 4% ownership of Rambus and a seat on the board. Since going public in 1997, Rambus watched its stock trade sideways -- especially during last year's delay of the first Intel product using RDRAM. When this glitch was resolved and Intel's support for Rambus reconfirmed, memory makers made RDRAM available, and Sony's (NYSE: SNE) PlayStation2 -- with Rambus inside -- sold gazillions in Japan earlier this year. (Watch for its U.S. invasion this fall.) When this happened, some FUD evaporated, shorts covered, and the stock zoomed from a split-adjusted $18.44 to $111.27 -- multiplying just under six times -- in 28 trading days! Takes your breath away, doesn't it?

Also see this article, Rambus, Intel, on the outs?
TinkerShaw puts it into perspective here:
and also here analyzing the merits of the lawsuits against RMBS and how IP companies defend themselves:
and ptnewell adds a message about the hypergrowth RMBS is experiencing:

ChrKrapp found these documents pointing to RDRAM adoption by EMC:
The new CLARiiON IP4700 NAS System uses between 2GB RDRAM and 8GB RDRAM.

15. What are some of the frequently asserted objections against RDRAM?

ptnewell has put together two excellent posts in a series of FAOs (Frequently Asserted Objections) to RDRAM:
FAO 1 and 2: Bandwidth and Latency
FAO 3 and 4: Cost and Performance
Bandwidth bottom line:
The above exposition is likely too dry for many readers, so let me conclude with a sports analogy. Some players are very good at racking up statistics during "junk time" play, when nothing is on the line. When the pressure mounts, however, these players may wilt. RDRAM is a pressure player: the more heavily memory is stressed, the better it looks compared to the alternatives.
DDR is the king of junk time. Its latency looks good, so long as memory accesses are rare. Under pressure, DDR, like other forms of SDRAM, wilts rapidly.

Bottom line on costs:
Production costs of RDRAM are currently roughly 30% higher than SDRAM, and declining fast. The contract price is probably more like 60% higher, although numbers are impossible to confirm. (One online Asian business magazine cited the 60% figure in connection with Dell.) It is clear that RDRAM has been far more lucrative for Samsung than SDRAM has been for its Korean competitor, Hyundai (4). The main reason RDRAM costs more is that OEMs are willing to pay more, and because only a small number of efficient manufacturers exist.

Performance bottom line:
By contrast, RDRAM appears extremely cost efficient for the Pentium 4. Estimates by Pabst and others show that P4 performance scales strongly with memory bandwidth. The performance gains will only grow with increasing CPU speeds. The PC133 chipset for the Pentium 4 will likely suffer a large performance hit for savings on the order of perhaps $60 in a 128 MB desktop system. Considering a $1500 system, a 4% upgrade in memory costs could produce a doubling of system performance on many of the multimedia applications that will attract users to the Pentium 4 to begin with.

16. What are some of the risks in regard to Rambus?

There is a lot of risk with RMBS, first and foremost its patents can be struck down in court. Without its patent protection RMBS is worth a great deal less. Intel may really decide to support another RAM standard, although so far none have materialized that can compete in terms of speed with RDRAM.
See this post on Bandwidth Utilization by rbnelson:
and this post on the Pentium 4 situation at Comdex by DougK99:

The main risk with RMBS is one of litigation. Once that is resolved and RMBS' patents are upheld the risks will go way down. We'll see how things go in the courts, but by the way memory makers have been caving in to Rambus I remain optimistic.

jasonxsmith describes the risks pretty well in this excellent post:
There is a risk that Rambus could lose all its patents when it goes to court. This would make the company worth virtually nothing, but it would also call into question every patent issued in the last 17 years. If the patents are not invalidated, there seems to be virtually no risk that the memory makers will find a way around the patents. Their best attempt was DDR, and its design isn't really all that good to start with.

Intel is still stating publicly that RDRAM is the way of the future and the major memory 5 years out. There is a risk that this could change. If RDRAM suddenly becomes very difficult and expensive to make and no one can find a workaround, DDR may find a second wind. If we get 3% of DDR sales, who cares, right? But DDR is a stop-gap measure, and if RDRAM does not work as a mainstream solution, another will have to be found - and quickly. So far, I have seen absolutely no evidence that RDRAM will not be ready, and cheap, by the time it is needed for value systems. I am getting very worried about DDR however. :-)

17. Is there a good site for news about RMBS?

Rambusite is a great site for news about Rambus:
You can also use TMF to search for recent Rambus headlines:
and there is a news section dedicated to computer hardware news:
Yahoo! also has a great news collection service:

18. What is the corporate history of Rambus?

From the Rambus web site:
Rambus Inc. was founded in 1990 by Dr. Mike Farmwald and Dr. Mark Horowitz, foremost experts in electrical and computer engineering. The rest is history:
November 1999: Rambus-based PCs and workstations begin shipping from multiple suppliers
April 1999: Samsung announces first validated RDRAM devices
February 24, 1999: Rambus reveals specification for Mobile system memory components at Intel Developer Forum
June 1998: Toshiba and LG Semicon ship functional RDRAM devices
November 1998: Intel demonstrates working systems with 800MHz Rambus DRAMs at Fall COMDEX '98
June 22, 1998: Rambus, Intel, Toshiba and LG Semicon announce system testing of Direct Rambus DRAM devices at 1.6 Gigabytes per second
March 30, 1998: Sales of ICs using Rambus technology exceeds $1 Billion
May 14, 1997: IPO - Rambus Inc. makes initial public offering of common stock
December 1996: Rambus and Intel disclose agreement to evolve Rambus DRAMs to meet requirements of PC main memory
December 1995: Nintendo64 ships with Rambus DRAMs
July 10, 1995: SGI announces plans to ship Indigo2 IMPACT(TM) workstations with Rambus graphics memory
September 1994: NEC ships 16M RDRAMs to SGI
June 1992: Toshiba demonstrates working 4Mbit RDRAM
March 1990: Rambus is Incorporated

19. Where can I find more of these FAQs?

Here is the master TMF list of FAQs, many of them are worth reading for Rambus investors:

20. Is there a valuation model out there for RMBS?

Here's one by ptnewell that calculates potential revenues, income and valuation for 2002:
Additional Comments on Valuing Rambus by ptnewell
Price Analysis Inc. Risk #2 by psuasskicker

21. Disclaimer

I hope this post answers most of your Rambus questions, before investing in any company do your research. I take no responsibility for any buy or sell decisions you may undertake based on this document. Rambus is a very volatile stock and it has shown tremendous price swings in the past that can make most investors queasy. I am currently long RMBS, and anticipate holding my investment for years to come, but I reserve the right to change my mind and sell at any time.

Good luck riding da BUS!

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