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No. of Recommendations: 12
I liked this post.
Thanks to Colin - Picked it up on the RMBS board
Hi All,

I recently re-read the GG with Rambus in mind. I also posted the GG argument that was cited in the recent Rambus duel. <cudos to me> I am (of course) very long Rambus (90ish % of my portfolio)
I think that Rambus is definitely a Gorilla candidate, but it helps to separate the distinct businesses that Rambus is in when performing Gorilla analysis.

1. The RDRAM business
This is a classic Gorilla story. Discontinuous inovation, open / proprietary model. I would agree that we are firmly in the bowling alley, entering the tornado. We will be fully in this tornado after this quarters earnings. At that time, we will have shown 2 consecutive quarters of hyper growth in RDRAM. Of course, Wall St. may take a little longer to clue in.

2. Licensing IP on older technologies
The way that I think about this story is not in the context of the GG, because that game has already been played out completely. Infact, SDRAM now has a very real subsititution threat from RDRAM.
I believe that when Rambus is shown to control the SDRAM market, the stock will adjust to instant Gorilla status.
At that point, Rambus will be in a position that QCOM could be in next year (maybe 2 years) That is, one gorilla game has been played out, and the next is going to be played out. (For Rambus, GG1 = SDRAM, GG2 = RDRAM) (For QCOM, GG1 = CDMA, GG2 = 3G)

3. The next market
In the GG, Moore says that the very best Gorillas, (Intel, Microsoft, Cisco, Oracle) "invent" new tornados for themselves. The effect is that when one product hits mainstreet, the next is entering a tornado, and the company seems to defy gravity by never exiting hypergrowth. I think that is how we should view the communications market. I wouldn't want to enter that tornado until RDRAM is on mainstreet. (maybe 2 years?) I believe that Rambus is trying to engineer a continuous flow of tornados. If they are successful, then this will be the stock to own for this decade, and perhaps more to come.

In summary, I believe that Rambus has:
a. a product on mainstreet (SDRAM)
b. a product entering a tornado (RDRAM)
c. another tornado brewing. (communications market)


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