FREE ESSAY ON ANALYTICAL REPORT ON RAMBUS

ANALYTICAL REPORT ON RAMBUS

TO: Small Online Investors, Stock Owners, and Consumers
FROM: Dmitry Podkuiko
DATE: November 21, 2000
SUBJECT: DDR-SDRAM vs. Rambus RDRAM______________________________ 
INTRODUCTION
The purpose of this report is to provide small online investors, stock owners, and
consumers with information on stocks investment into memory manufacturers and processor
manufacturers. Computer industry is moving away from old SDRAM memory standard and is
looking for a new industry standard. Changing a memory standard can change the stock and
consumer market significantly. 
PROBLEM
It is very crucial to know which industry standard will be accepted by the industry and
consumers. Current situation doesn't allow for a relatively sure investment into the
stocks of the companies involved. 
Two standards are competing heavily for the market and industry support. Currently Rambus
has support from manufacturers that previously signed the contracts with them and
DDR-SDRAM is an open industry standard supported by a coalition of companies. 
FINDINGS:
Rambus RDRAM vs. DDR-SDRAM
RDRAM is a memory standard developed by Rambus Inc. It is heavily backed by Intel
Corporation as a standard despite memory manufacturer's and consumer opposition to the
standard. Manufacturing of RDRAM requires special processes and manufacturing facilities
that have to be built from the ground up. This places a high price tag on RDRAM for
consumers. Rambus signed a few contracts with a powerful processor manufacturer Intel
Corporation back in 1995 that oblige Intel to support the standard. 
DDR-SDRAM is collectively developed by such companies as Advanced Micro Devices, Micron,
Infineon and Siemens. DDR-SDRAM is simply an extension to SDRAM technology. In comparison
to RDRAM, DDR-SDRAM can be manufactured at only 5% premium over regular SDRAM. This means
that manufacturers will be able to use most of their equipment in their current
facilities with a relatively low cost modernization. 
Prices and Supply of regular SDRAM 
Mainstream SDRAM prices plummeted to their lowest point ever amid concern that the
holidays won't generate enough PC sales to dry up inventory that has flooded the spot
market for months. 
While that may be good news for OEMs, for memory makers it's meant a return to the days
of selling chips at or below production cost. Yet DRAM producers took the price plunge in
stride, saying the excess has been flushed out and first-quarter orders look strong. This
basically means that OEM PC manufacturers chose to buy more RAM to keep enough RAM in
their supplies for possible future shortages. 
However, RDRAM was the only one to be left out from the price drops. RDRAM is much more
expensive due to the high cost of manufacturing process and OEMs do
Release of Pentium 4
Just a few days ago Intel corporation released their new processor architecture - Pentium
4. Currently Pentium 4 is supported only by RDRAM. RAMBUS future sales heavily depend on
sales of Pentium 4. So far Pentium 4 was getting less than average reviews in the tech
press. System integrators are not too exited about upgrading to Pentium 4 due to the fact
that it will require to replace regular components with more expensive ones. 
As history shows, Intel's stock price rose when new processors were introduced, but with
the introduction of Pentium 4 the stock price dropped. Investors seem to be discouraged
by the fact that Pentium 4 is costly and didn't make major breakthroughs in technology.
Intel lost its ground to AMD in processor market over the past 2 years. One of the main
reasons was slow sales of Rambus supporting chipsets. AMD was able to gain a hefty
percentage of the market share by backing DDR-SDRAM. 
Industry Support
Some of the manufacturers took a position not to pay royalties to Rambus and support DDR
SDRAM instead of RDRAM. Rambus filed lawsuits against Hyndai, Micron and other
manufacturers. Rambus is viewed negatively by the rest of the industry due to all the
lawsuits that were filed.
In its turn, Infineon - a member of DDR group- filed an antitrust suit against Rambus
Inc. 
Release of New Software
When Windows 95 was released memory makers experienced a high demand for their products.
Memory prices were at their highest prices. Since then Microsoft Corporation released
several versions of Windows. Their recent release of Windows 2000, which had higher
memory requirements, launched the RAM prices for their rise again, but the rise didn't
last very long. 
Gateway and Dell were hurt with component shortages. That created a situation when there
was enough ram, but not enough components like processor to keep up with production of
complete systems. 
Legal Aspects
Rambus Inc. owns several patents on SDRAM. Rambus Inc now wants every manufacturer to pay
royalties on any device that interfaces with an SDRAM, DDR or direct Rambus DRAM (RDRAM)
chip. Several manufacturers like Toshiba and Samsung already signed agreements with
Rambus to pay royalties on SDRAM, DDR SDRAM and RDRAM. 
If Rambus patents hold, they are going to have a reason to collect royalties not only
from anybody who manufactures SDRAM, DDR or RDRAM, but also anybody who makes a chipsets
that interfaces with any of those RAM types. An entire industry would have to become
licensees of Rambus.
Conclusions
RDRAM may not be the future of the PC platform now that DDR SDRAM has taken some
substantial hold in the industry, and even Intel may not be able to force the RDRAM
standard on the industry. In fact, Intel only follows Rambus because they are bound by
contracts signed in 1995. But Intel is sure big enough to keep RDRAM from holding back
Pentium 4 until a suitable DDR Pentium 4 platform is available.
Intel may give a license to another company to manufacture a chipset for Pentium 4 that
would support DDR-SDRAM and hold their own chipset that supports RDRAM until the
contracts with Rambus are renegotiated or expired. However, it should be noted that
Rambus is very willing to litigate in order to insure success of their technology. 
If the DDR group of manufacturers wins against Rambus Inc. in court, RDRAM can be
considered doomed and will only be supported by Intel until the contracts expire.
Intel earnings for the first quarter of 2001 may not meet expectations due to possible
weak sales of Pentium 4. It will take some time for manufacturers to prepare their
products for Pentium 4 and roll them out on the market. Intel didn't meet the earnings
for the previous quarter either. The stock price of the company may continue falling in
the first quarter of 2001.
DDR-SDRAM manufacturers are not really vulnerable in their current position. Even if
Rambus will win in court, they would still be able to manufacture DDR-SDRAM. They will be
required only to pay royalties to Rambus for their products. 
Recommendations
Basing on conclusions, it's not recommended to purchase stocks of the companies that are
solely supporting Rambus technology. Particularly, Rambus stock(RMBS) itself is a gamble
investment. Rambus does not manufacture memory chips, but this company does research and
development and profits from royalties on their intellectual properties. Rambus earnings
heavily depend on agreements with manufacturers to pay royalties. 
Intel is a very versatile company that manufacturers multiple products that do not relate
to Rambus. Even if Pentium 4 will fail to capture the market with the Rambus technology,
Intel will quickly recover from stock price losses by supporting a different standard
through third party manufacturers.
Purchasing stock of the companies like Micron, Infineon, and Siemens is a relatively safe
investment. If Rambus will win in court, expected earnings will be slightly lower because
they will have to pay royalties. If Rambus loses their legal cases, DDR group of
manufacturers will be a big winner. Consumer market for DDR-SDRAM looks very prospective
in the first quarter of 2001.
REFERENCES
Tomas Pabst, The Rambus Zombie Versus the Wounded Chipzilla www.tomshardware.com, July
19, 2000
Tomas Pabst, Rambus Requiem -RDRAM Fails Bandwidth Tests, www.tomshardware.com, May 29,
2000
TERMINOLOGY
SDRAM - Synchronous Dynamic Random Access Memory
DDR-SDRAM --- Double Data Rate SDRAM
RDRAM- Rambus Dynamic Random Access Memory, designed by Rambus, Inc in collaboration with
Intel Corporation. Commonly referred as Rambus.Website: 
OEM - Companies like Dell and Gateway that purchase computer components in bulk from
manufacturers at great discounts.