Rambus Inc (RMBS) 2002 Q2 法說會逐字稿

Today's call is being recorded. If you should have any objections, please disconnect at this time.

I would now like to turn the call over to Mr. Bob Eulau. Thank you, sir. You may begin.

Bob Eulau, Chief Financial Officer, Rambus, Inc.: Welcome, everyone, to the quarterly conference call from Rambus, Inc. covering the financial results of our second fiscal quarter in the fiscal year 2002.

My name is Bob Eulau and I am the Rambus Chief Financial Officer and joining me today is Geoff Tate, our Chief Executive Officer.

I'll start with a summary and an analysis of the financial results of the quarter and then turn it over to Geoff for a discussion on the business progress that we have made in the quarter. We'll then open the lines for Q&A.

We've emailed the financial release to everyone on our current list. If you have not received it, it's available on our Web site at www.rambus.com. A replay of this conference call will be available for the next week at 800-468-0319. In addition, we are simultaneously Web casting this call and it can be accessed on our Web site for one week beginning at 4 p.m. Pacific time today.

Before we begin I need to state that our discussion will contain forward-looking statements regarding the company's financial prospects, development plans, anticipated product shipment dates, relations with licensees and other third parties, and various other matters and that actual results may differ materially. Among the reasons which could cause actual results to differ materially is the possibility of inadequate shipments of RD memory devices and controllers for the Sony PlayStation 2 and the PC main memory market, the market response to these products, any deterioration in DRAM markets including declining prices, any delay in the development of Rambus based products by licensees, any delay in the development and shipment of new Rambus products, a greater than expected response of the market to competing technology, a lack of progress on price and cost reduction by RD Rambus suppliers, inadequate progress on signing new contracts or RDRAM, Yellowstone, , or EDR memory devices and controllers, , current licensees not fulfilling their contract obligations, current licensees terminating their contract, adverse litigation decisions and other factors, which are available in our SEC filings, including our 10-K and 10-Qs.

This was another -- another quarter of profitability in an environment where many companies are still struggling to regain profitability. We continue to offer leading technologies while maintaining -- while managing our business through some very rough economic conditions.

Our operating profit grew 15 percent sequentially and our net income grew nine percent sequentially. We delivered earnings per share of seven cents, which was driven primarily by lower litigation spending. Our total expenses were the lowest that they have been in the last six quarters.

Now I'll make some more specific comments on the quarter starting with revenue. Total revenue for the quarter was 23.5 million, down five percent sequentially and down 25 percent over the same period last year. This is in line with the guidance that I gave last quarter. Total royalties for the quarter were 21.8 million, which is equal to last quarter and down eight percent over the same period last year. Please remember that the royalties we're reporting this quarter relate to our customer shipments in the fourth calendar quarter last year.

RDRAM royalties were excellent from both a memory device and controller standpoint. RDRAM memory devices had sequential revenue growth at 23 percent and sequential unit growth at 27 percent. For RDRAM chipsets, given our agreement with Intel, we only have unit information on chipsets supplied by other customers. RDRAM controllers, excluding Intel chipsets, had sequential revenue growth of three percent and sequential unit growth of seven percent. SDRAM and DDR royalties were down sequentially about nine percent for memory devices and controllers combined.

Our contract revenue in the second fiscal quarter of 2002 was down about 1.3 million, which is consistent with the guidance we provided you last quarter. We believe that contract revenue will stay at these levels until we are successful in signing a Yellowstone licensee.

Spending for the March quarter was very low. We benefited from the deferral of the Micron trial in Delaware. There will be no trial in Delaware until after the Virginia appeal is final. Cost of litigation was down 2.9 million from last quarter at 1.6 million. Operating expenses, excluding cost of litigation, were essentially flat.

From a profitability standpoint this was a good quarter. Net income for the second fiscal quarter was 6.7 million compared to 6.2 million in the previous quarter and eight million in the same period last year. This profitability led to strong cash flow for the quarter. Even while investing $5 million in share repurchases, our cash, cash equivalents, and marketable securities during the second fiscal quarter increased to 162 million from 159 million last quarter and 151 million as of March, 2001.

The last few months have demonstrated that conservative accounting and strong balance sheet, as was true with Rambus, should highly valued. Starting last quarter, we decided to no longer present pro forma financial statements. We had been making only minor adjustments and we felt that issuing pro forma statements was no longer helping investors to better understand our financial results. The accounting at Rambus has been conservative. We do not recognize any material royalties at the end of the quarter unless we receive the cash by earnings announcement. In the case of contract revenue, we do not recognize any revenue in excess of the cash that we've received. Any material accounts receivable physically reflect cash that has all ready been received by the time of our earnings announcement. We have no inventory, so there's no risk in terms of obsolete excess or over valued inventory. Finally, we do not have any off balance sheet transactions and we have no special purchase vehicles to move assets and liabilities off our balance sheet. Our only current financing transaction is the lease of our buildings, which has been fully disclosed in our 10-K.

The balance sheet clearly demonstrates the strength of our financial model. As we announced last October and as I just mentioned, we are using some of our cash to repurchase outstanding common stock. A key objective of the program is to reduce the dilutive effect of employee stock options. In the quarter just ended, we repurchased a total of 635,000 shares at an average price of $7.87. Volumes of purchases will vary by quarter based on the opportunity. At the end of this quarter we average basic shares outstanding of 100 million and fully diluted shares outstanding of 103 million.

Now I'll give you some guidance on what to expect in the next quarter, but this guidance, obviously, has a lot of uncertainty associated with it. This guidance reflects our best guess at this point in time and our actual results could differ material -- materially from what I'm about to review.

We do not expect revenue to differ significantly from the revenue we recognized this quarter. We expect spending will increase next quarter in non-litigation operating expenses. We expect that spending will be up by about a million dollars. This is primarily driven by incremental investments in the business and our Yellowstone program.

Litigation spending is all difficult to predict because we do not control the time lines and the requests from courts, nor do we control the actions that our adversaries may take, which could cause us to incur more expense. Based on what we know today, we believe that it's likely that litigation spending will again be below $2 million next quarter.

We also expect a decline in other income by another $200,000 next quarter. This is driven by a new agreement on the sub-lease of our former facility. The benefit of our new agreement is that we a letter -- a letter of credit that effectively guarantees that we'll be paid for the next 12 quarters.

Finally, we are still expecting a tax rate of 35 percent for this year and if you add up all of this guidance the resulting earnings per share is about six cents.

On the subject of litigation I will quickly review the major items in our litigation time line. Let me start with progress in the U.S. This quarter -- this was a quarter when litigation activity significantly declined. However, there were still some important objectives that we accomplished this quarter, including the completion of our -- of the briefing portion of the appeal from last year's Virginia trial against . This appeal has an expedited schedule that should result in the oral argument occurring some time early summer, probably June. We understand that this should lead to a ruling from the Appellant Court by the early part of 2003.

We believe that the single most important objective in our U.S. litigation is to overturn the errors that were made in Virginia. The U.S. Patent trial against and Micron are both deferred until after the rulings from the Appellant Court. We are pleased by this because it lowers the probability of the errors in Virginia having a negative effect on the other cases. In fact, in the Delaware Micron case in his written opinion specifically noted that other companies cannot rely on certain rulings from Virginia. He also agreed with Rambus that to move forward now would be wasting judicial resources.

We previously indicated that the U.S. Federal Trade Commission has been reviewing a number of companies involved in the technology standard setting body. In this regard, the FTC staff continues to examine our participation in and its standard setting proceedings in the 1991 to 1995 timeframe. The FTC staff is continuing to request information from us and our lawyers are actively discussing our views with the FTC.

As to the shareholder class action lawsuits, all of the suits in the U.S. Federal Courts have now been consolidated in the District of Northern California. There's also a derivative suit in Delaware and we have filed a motion to have that suit dismissed. In addition, there's a new plan of seeking to certify a class of purchasers of memory product alleging that they over paid because of the Rambus royalties. We have just been served with this new suit by a company named . Based on our understanding, we believe there is no merit given the rapid decline in memory prices and the fact that not all of the memory manufacturers paid Rambus royalties.

In Germany, we're making progress. You will recall that there are three patent infringement trials underway in against , Micron, and . This quarter, in spite of opposition from and Micron, the court made the decision to go forward with the same technical experts that has been assigned in the case. We now expect that the expert will get back to the court some time this quarter on infringement issues for the case. Our current estimate is the patent validity hearings will occur in September. It is our belief that only after these two rulings, validity and infringement, would an injunction issue in Germany. Our expectation is that such an injunction, if it issues, would initially be against and would issue in the late third or early fourth calendar quarter of 2002. It is likely that such an injunction -- that if such an injunction were issued we would be required to post a significant bond. Any injunction would be an event that, we believe, would greatly facilitate the broad revolution of this case.

That covers the key financial and legal issues for the second quarter of fiscal 2002, so now I'll turn it over to Geoff to discuss the current state of Rambus business.

Geoff Tate, Chief Executive Officer, Rambus, Inc.: Thanks, Bob.

Today I'm going to discuss the progress we've made in the last quarter in each of our three businesses. I'll start first with our two new businesses where I think we're making very good progress on technology development and customer milestones.

First, in the March quarter in our RaSer serial link business we another period of continued progress. This is our first non-memory interface technology, the Rambus . To refresh your memory, the RaSer cell can be used to implement the physical layer of a wide range of communications and computer applications, including wide area network switch and router back , 10 gigabit Ethernet, fiber channel , serial , and other high speed communications interfaces. In total, we expect the available market for the serial links to reach over a billion links within a few years. Sometimes there are multiple links on a single chip.

Today most serial links use standalone, separate transceiver chips, but the trend is towards integration moving these links onto high scaled integration devices, like network processors and switch chips and this ties well in the Rambus business model providing well engineered circuits and systems solutions. Using the Rambus RaSer for integration allows systems designers to save internal resources, money, and power consumption.

At this time, we have between five and 10 RaSer licenses with the expectation of recognizing our first royalty revenue this summer. At this point, Intel and and have announced that they licensed our RaSer technology and -- and , an important chip supplier, demonstrated its RaSer based channel adapter at the recently.

RaSer based chips have passed production qualification at a major OEM, as well. We have other customers who've made the transition from technology development of their chips to the point where their products are being sampled. Our customers collectively now have a total of four working chips that include our RaSer serial link cell technology. So, we're getting closer to the point where we can first recognize RaSer royalties on production shipments.

During the quarter, we also demonstrated the industry's first 0.13 Micron serial link cell for license at in January. This 0.13 Micron RaSer technology was demonstrated at over four gigabits per second at the . This cell performs extremely well over a wide operating range of one to four gigabits per second with extremely low power, less than per channel at 2.5 gigabits per second.

The market for 10 gigabit per second serial link is particularly exciting to us. We expect to be leaders in delivering serial technology at this breakthrough speed. Our solution for 10 gigabits per second is based on well differentiated and protected intellectual property. We expect the market for 10 gigabit per second serial links to initially, of course, be small, but be a fast growing portion of the total large serial link market. We believe we can achieve excellent operating margins in this business over time. The value proposition we have is compelling, we believe, because the only existing way to move data at 10 gigabits per second rate over and through optical links, which are much more expensive to implement.

Secondly, our second new business and area of innovation that I want to discuss is our Yellowstone memory interface technology. We also announced this technology along with the five and 10 gigabit per second RaSer technology last October. We are now working in our third pass of test silicon for this program, the Yellowstone . At each step of silicon we've been pleasantly surprised by the performance we've been able to achieve. Yellowstone signaling is initially at 3.2 gigahertz technology with plans to go to 6.4 gigahertz as the next step. We are continuing to share the results of our series of test silicon with potential partners and customers under non-disclosure agreements. The feedback we have gotten has been very positive and quite encouraging. Our hope is to have our first licensee signed by this summer for Yellowstone.

We believe that the early application of Yellowstone will be in the consumer electronics and communications markets where high performance out of just one or two DRAMs is of paramount importance for advanced networking and digital image manipulation consumer products.

Third I'd like to make some specific comments about our our third and original business. In the fourth calendar quarter of 2001, for which we reported royalties today, our estimate is that over 14 percent of all worldwide DRAM revenue was accounted for by RDRAM memory devices, and that the unit volume of our DRAM memory devices that were shipped in the fourth quarter of 2001 increased over the prior quarter by 27 percent.

RD RAM memory devices continue to gain design wins in consumer networking and computing market segments. In the consumer segment, the Sony PlayStation 2 continues to sell well against all competitors. Our revenue this quarter benefited from the success that Sony is having with the PlayStation 2. In the networking segment, Intel disclosed at the Intel Developer's Forum in February that RDRAM memory has been selected by them for their next generation of network processors.

Together with the test, two of the largest network processor companies now will be connecting to RDRAM memory. In the computing segment, RDRAM memory continues to ship in PCs, servers, and workstations. At the Intel Developer's Forum, Intel reiterated their plan to support a follow-on chip set to the 850, which is shipping today, which they call the . The 850-chip set today is still the highest performing chip set offered by Intel for the Pentium IV.

We are expecting the new chip set, the , with a increase in front side bus speed to 533 megahertz for interface and the processor will ship this quarter. Also remember last November, silicon-integrated systems or SIS these companies, which designs and manufactures PC chip sets among other products, expanded their original RDRAM licensing agreement with us to include the same generation of RDRAM technology as is used currently in the 850 chip set.

In addition, we're expecting Compaq will be shipping the next generation of processors that directly connect to RDRAM memory by the end of this year. The announcement of the 2.4 gigahertz Intel Pentium IV last Tuesday is another important step to faster and higher performance processors. Our internal bench marketing analysis shows that the performance advantage of RDRAM memory over increases as processors become faster, and third party developers agree.

RDRAM memory's growing performance advantage was validated by an over clocking benchmark done by this past quarter. The author's conclusions were - quote - "the limiting factor with the Pentium IV at high clock speeds certainly - clearly lies in the limited bandwidth of . This influence was not seen in the RDRAM solution" - end quotes.

It's great to have the public validation of what we believe is the clear advantage of RDRAM memory today and into the future for ever faster PC processors. As processors faster than 2 gigahertz become mainstream and consumer demand for real time applications increases, it makes progressively more sense for these processors to be paired with high performance per DRAM memory.

recognize the performance isn't the only feature that matters. The price of RDRAM versus is also very important. For any purchaser, the system level price difference to upgrade to RDRAM isn't significant at this time relative to the cost of the total system. The increase of memory prices and the decrease in RDRAM memory prices was pretty well documented during the last quarter. We believe that RDRAM memory delivers the best price performance solution in the industry today.

This is especially true in the context that RDRAM memory delivers a higher percentage performance increase than the corresponding increase in system cost due to the use of RDRAM. RDRAM continues to be the most cost-effective means to improve system performance. Innovation continues with our team making excellent progress in the RDRAM roadmap that we announced last year.

We demonstrated the world's highest bandwidth PC memory module at in February, the , which delivers 4.2 gigabytes per second from a single memory module. We also demonstrated there the 1200-megahertz RDRAM devices in full speed operation. The RDRAM roadmap is real and compelling.

As recently demonstrated their new motherboard that supports the module at the recent show in Germany. We expect our DRAM to continue to play a leading role in the performance of PC desktop space. Our challenge is to make sure that current and potential customers understand this.

And this leads me to another announcement. I'm pleased to announce that has joined us as Senior Vice President of Marketing. has - had excellent experience in executive marketing roles at , National Semiconductor and before spending the last year or so . He has great experience in relationships with many of the most influential people and press in our industry. And is a welcome addition to our executive team.

Finally we have a number of activities planned including participation in Taiwan, China, and over the next few weeks, and we will be hosting our own Rambus Developer's Forum in Japan at the beginning of July in Tokyo. These venues will provide exciting - excellent opportunity for our partners and Rambus to continue to get the message out on the key advantages that we offer as a high-speed chip connections company in RDRAM, and Yellowstone.

That's the end of our prepared remarks, and we'll now open the lines to your questions.

Thank you and at this time if you would like to ask a question, please press star followed by one on your touch-tone phone. You'll be announced by name prior to asking your question. Once again to ask a question, please press star followed by one now. Your first question comes from and please state your company name.

Hi it's for at Morgan Stanley. , I'm wondering if on the royalties, can you split out just like a percent split between the RDRAM related and let's just say other memory.

Yeah, that's not a split that we've been providing.

OK.

I don't think I want to start down that slippery slope right now.

Understand. And more of a general question, can you update status on the RDRAM and ?

Well those are two separate things. The RDRAM, our partners today are yielding to and yielding quite well, and are ready and willing and able to support customers as they need those devices. is a separate issue, and as we've said before, we think is of secondary importance in terms of cost reduction, but does provide a few percent reduction in and is something that is really up to the DRAM companies to decide to support or not. We are encouraging controller companies to support as well as the existing 16 devices in the future so that they could take advantage of memories when they become available.

OK. Thanks.

Thanks, .

Yeah, thanks .

Thank you. Your next question comes from and please state your company name.

. Who else besides and are planning to come out with boards?

I think that, you know, it's up to customers to announce their products when they're ready, and we can't pre-announce customer's product plans, but we have seen a lot of interest in in the PC space and in consumer and communication applications.

OK and you said in the fourth quarter you estimated there was a 27-percent increase in the RDRAM unit volume. To what number of units do you estimate that?

We, again, haven't been providing that level of details. Just trying to give you some indication of a growth there, and that was based on the royalty reports that we got from our partners.

OK and then back to the chip sets and the PC space, are you expecting any other forthcoming chip sets in addition to the and the ?

By I assume you mean . There aren't a whole lot of chip set companies, so those are Intel and SIS are two of the biggest. is the only other real sizable player in the area. At this point.

Moving, if things work out where we move from one chip set supplier to two, we'd do that as great progress for the time being, but we'll keep working on more.

OK, just a couple of other fast ones. Are you collaborating with IBM, Sony, and Toshiba on this PlayStation 3 chip development?

Well, we can't comment on any particular company in terms of whether they are or what they might be talking about with us because those things always happen under non disclosures. But certainly we would be interested in working with anybody who has new high performance consumer products because we think our technologies would be a great for them.

OK and final question, how come - why are and licensees for RaSer cells given that those are a threat to their discreet transceiver chips?

I don't believe we said that they are.

Oh, OK.

I think that we said that the licensees are ...

DRAM.

Yeah.

OK. Great. Thanks.

thanks .

Thank you. Your next question comes from and please state your company name.

, good afternoon gentlemen.

the projection in operating expenses going up about a million on - I realize that stems from RaSer and Yellowstone. Is that - could you break out that between R&D? Is it marketing or kind of a mix?

It's predominantly R&D.

OK.

But we have hired some additional sales and marketing people ...

Certainly a smaller percentage than the increase in engineering.

OK. And on the royalties you expect from RaSer this summer, is that from all the licensees that you have announced or just a handful or what sort of visibility do you have on that?

Well, we haven't - we haven't been talking much about royalties until we actually get some, and we're very hopeful that we'll get our first royalties in the summer and I think that's about all we want to say at this point.

OK. Fair enough. Thanks.

Thank you. Your next question comes from and please state your company name.

, hi guys.

Hi .

Between your 10-Q and 10-K, there are a couple of different issues I was wondering about. You outline in your queue that there are three large customers in the - in the previous quarter, 40 percent, 21 percent and a 14-percent. You also kind of describe how a couple of your contracts have become fixed contracts. I'm assuming or I'm asking if the Intel contract I'm assuming is the 40-percent customer. You mentioned that you went fixed with another large DRAM producer. I'm guessing that's the 14-percent customer. And then there's a 21-percent customer, which I'm assuming is Sony and PlayStation 2. I'm just trying to figure out why when there's such an increase in RDRAM I'm not seeing it commensurately in your revenues. Does that kind of explain it - basically 54 percent of your revenues are fixed and 21 percent is tied to ?

Yeah, I think you're getting into - you know we try to disclose what we think is appropriate in the - in the filings, and you've certainly made some assumptions there. I don't think we want to be commenting beyond what we've chosen to disclose .

It just - you know it was asked in another one of the questions. Just because it sounds like there's such an increase in RDRAM and between and other things. And I'm trying to figure out how correlated your future revenue should be with kind of RDRAM penetration and PCs. But is it really kind of just, I should assume 25 percent of your revenues is really the part that's going to be correlated, the pricing and unit volumes?

Yeah, again, I'm not sure I want to go that far. I mean I think we have said in previous quarters that there is a pretty high percentage of our revenue that is fixed in nature at this point, and yeah, I don't - I don't think I want to go up further than that in terms of validating actual numbers.

OK, the one other question is at the bottom of the 10-K in section of your Intel contract it says Intel may at its option terminate this agreement for convenience on 60 days prior written notice to Rambus. Is that - you know, does that basically mean that if the lawsuits don't pan out the worse case scenario is that just goes away, or does it fall back to the old agreement?

Well the old agreement is no longer in existence. And I believe, you know, pretty much the entire Intel contract is there, so you may have read it more thoroughly and recently than I have. But there isn't an old agreement that's in effect anymore, so if Intel were to terminate, they would have no license.

OK, so they'd have to then license it like all the other DRAM guys?

Or or to tell us that they want, you know, meet us in court or something. The fact of the matter is, is in practical terms we've been in this business more than 10 years. People can terminate a license at any point by just stopping sending in the money, and then you're into legal battles at that point. So the right to terminate is just a recollect - you know, recognition of that fact.

OK. All right. Thanks a lot guys.

Thanks .

Thank you.

Thank you. Your next question comes from and please state your company name.

. I had a couple of questions, first about the legal situation. I was just wondering the cases that are going on in Germany, the injunction that you guys said that you were hoping to get, is - what exactly are you talking about - an injunction against continuing to use technology or ...

Yeah, that would be the injunction. It would be to ...

Now do you ...

You said that would require you guys to put up a significant bond. What do you mean by that?

Well, first of all we don't know exactly how this is going to play out, right? So, you know, it's all a bit of speculation on our part. But you know if we were to succeed and gain an injunction, there's still an appeal process in Germany that could go into effect and I believe that it's often the case that you're then required to post a bond pending outcome of that appeal.

OK and then do you guys have any estimate - I mean if you were to lose these cases in Germany, it's my understanding that you would be responsible for the legal costs of the parties that you're, you know, against in this case. Do you guys have any idea what kind of liability that could be or any quantification on what that, you know, if the worst case were to happen, what that might run you.

Yeah, I actually don't know that off the top of my head, but we had to post a bond in Germany to move forward with the cases, and I believe that was to cover the legal costs, and it's in our restricted cash that's shown on our balance sheet.

OK ...

One of - one of several items in that account.

Got you and then do you assume that that's all of the cash that might be needed or required?

Well we have no way of knowing what the other side's legal goals are. I'm actually - I don't actually don't know for sure if we do have that liability. We may or may not.

OK. Got you. All right. I'm sorry, that - saying that amount's broken out. It's just in your K and Q because I just see cash equivalence here. I'm trying to find the restricted cash. What's - it's in long term?

Yeah.

Marketable securities or ...

It's in long term, I believe. Let me ...

Oh here it is, restricted cash. Twelve , I see it, OK.

Yeah, there's also - you know the biggest item in there is actually covering attorney costs in Virginia. So just to kind of put things in perspective.

And that's the - is that the $7 million? I thought you guys had not accrued for the $7 million .

we have not accrued, but we did have to post a bond.

Oh, I got you. OK. All right, and then I also want to ask you about your guidance for next quarter. Back to the previous questions that have been asked about the royalty - the royalty rates and the number of them being fixed in particular the Intel piece, which is I - from what I believe about $10 million per quarter. I'm just trying to get a sense of what the unit - you would imagine the unit shipments for RDRAM might fall off quite a bit after the PlayStation 2 launch, as well as, you know, PCs have been sluggish in general. So, can you just talk a little bit about - more about that on how you're seeing the visibility?

Well, you know, first of all, as we've been saying here, there is a fair amount of the revenue that is fixed in nature. So that's obviously pretty easy to forecast, and then you're right, there are a number of variables and we don't have, you know, a perfect view into the future. There's risk associated with whatever revenue. In fact, you know, as we - I think we've said repeatedly in the past, our visibility in terms of production shipment rates until we see royalty reports and average readers of the press and market research reports much like our investors and analysts are in order to try to figure out where things are going. So we don't have a crystal ball to look into that kind of information.

Got you. OK. Great. Thanks for the time guys.

Thanks.

Thank you.

Thank you. Your next question comes from and please state your company name.

. ...

Yeah.

Since this quarter's results reflect last quarter's shipment, am I correct in assuming that the introduction of the chip set from Intel is not affecting this quarter's results?

I think that's a fair statement. I think that there were some, perhaps some early shipments late fourth quarter - fourth calendar quarter last year.

OK.

And probably this first quarter would be the first quarter when you see those chip sets shipping in volume.

And could you provide any color on how you think that that introduction will then be affecting next quarter's results?

Again, I'm not - I'm not sure we want to go much further than the guidance we've given.

We don't have any particular hard data, but ...

OK.

I think you can look at the PC magazines and you see more DDR systems, which are displacing systems, but Dell, for example, their high-performance PC remains RDRAM based, and to the extent they're still a good market for you know the highest performance PCs, you know the benchmarks are showing that those are continuing to be based on the 850 chip set with RDRAM.

OK. There is a report out by the "Inquirer" that the is going to be supported on . Have you heard the same?

I had just seen that report. But to the extent that it involves Intel of course we couldn't comment .

OK, that's all the questions. Thank you.

Thanks.

Thank you.

Thank you. Your next question comes from and please state your company name.

. Hi guys.

Hi .

Since the Intel ran its licensing agreement, gives you guys the right to sublicense Intel patents for memory interfaces. Does this give you the right to sublicense the to or anybody else for the new RDRAM chip set?

Oh I'm pretty sure Intel didn't give us that right.

OK.

Yeah. Nobody told me we had that right, and I'm not aware that we asked for it or that they gave it to us, so I don't think it's in their contract.

OK. Thank you very much.

OK.

Thanks, .

Thank you and once again as a reminder, if you do wish to ask a question, please press star, one on your touch-tone phone.

Your next question comes from and please state your company name.

This is of . I wonder if one of your gentlemen can clear up some of the confusion over recent pricing in the marketplace on . Producers like Micron and Samsung are saying $5 is the right price. The users are saying that they don't want to pay the contract price. They want to pay the spot price, go up to the and it seems to me this wide gulf between producers and users. Can you clear up some of this confusion?

No. We don't have any particular insight into that information other than when we get our royalty reports. We do get some information on price, but those are based on shipments from at least 60 days earlier.

OK. Thanks a lot.

it doesn't make it real timely the time you're interested in.

OK.

And at this time we have no further questions.

OK, thanks very much everyone.

Yeah, thank you.

Good-bye.

This concludes today's earnings conference call. We thank you for your participation.