Rambus Inc (RMBS) 2002 Q4 法說會逐字稿

Good afternoon. My name is Ursula, and I will be your conference facilitator today. At this time, I would like to welcome everybody to the Rambus fiscal year-end and fourth quarter results conference call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer period. If you would like to ask a question at that time, simply press star then the number 1 on the telephone keypad. If you would like to withdraw your question, press the pound key -- I'm sorry -- press star, then the number 2 on your telephone keypad. Thank you. Mr. Eulau, you may begin your conference.

Thank you and good afternoon, everyone. Welcome to the quarterly conference call for Rambus Inc. This will cover the financial results for our fourth fiscal quarter in fiscal year 2002. My name is Bob Eulau and I'm the Rambus Chief Financial Officer. Joining me today is Geoff Tate, our Chief Executive Officer.

I'll start with a summery and analysis of the financial results for the quarter and then turn it over to Geoff for discussion on the business progress that we've made in the last quarter. We will then open the lines for questions and answers.

We've e-mailed the financial release to everyone on our current list. If you have not released it, it's also available on our Web site at www.rambus.com. A replay of this conference call will be available for the next week at 1-800-642-1687. In addition, we are simultaneously Web casting this call, and it can be accessed on our Web site for one week beginning at 4:00 P.M. Pacific Daylight Time.

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 our DRAM memory devices and controllers for the Sony Playstation 2 and the PC main memory market; the market response to these products; any deterioration in the DRAM market, 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 DRAM suppliers; inadequate progress on signing new contracts for RDRAMs, Yellowstone, SDRAM, or DDR memory devices and controllers; inadequate progress on signing new contracts or [racer] serial links; current licensees not fulfilling their contract obligations; short licensees terminating their contracts; adverse litigation decisions and other factors which available on our SEC filings including our 10-K and 10-Qs.

This was the fifth quarter in a row where our earnings per share were at least 6 cents. This was 1 cent better than our guidance that we gave last quarter. The results were better than we expected, primarily due to higher revenue. This is our second quarter in a row of sequential revenue growth. Our operating profit was flat with the previous quarter and down 11% over the same period last year.

Now for a bit more detail on revenue. Total revenue for the quarter was $24.5 million, up 3% sequentially and down 12% over the same quarter last year. Total royalties for the quarter were $23.2 million, which was up 5% relative to last quarter and down 7% from the same period last year. Please remember that the royalties we were reporting this quarter relate to our customer shipments which took place in the second calendar quarter of this year.

Our DRAM royalties were consistent with the seasonal patterns that we had expected from both a memory device and controller standpoint. Overall, our DRAM royalties were up 3% over last quarter. Our DRAM memory devices had a sequential revenue decline of 8% and a sequential unit decline of 7%. For our DRAM chip sets, given our agreement with Intel, we are only able to have unit and revenue information on chip sets supplied by other customers. Our DRAM controllers, excluding Intel chip sets, had a sequential revenue increase of 18% and a sequential unit increase of 14%.

SDRAM and DDR royalties were up sequentially about 11% for memory devices and controllers combined. This was on the high end of our expectations. This sequential increase was driven by very strong shipments of both SDRAM and DDR memory controllers. To help with the scenario planning you may be doing, the revenue for SDRAM and DDR memory and memory controller royalties comprised about 36% of our revenue for the quarter that ended in September.

Contract revenue for the fourth fiscal quarter of 2002 was $1.2 million, down about $300,000 from last quarter. It's interesting to note that about 40% of our contract revenue now comes from the RaSer serial link business. We believe that contract revenue will stay at these levels until we find sign significant new Yellowstone or RaSer licensees. We have signed our first services agreement for Yellowstone, but it is small and we have not begun to recognize revenue on it yet. It is also likely that if we are successful in signing new contracts, the cash receipts will be strong; although, they will not translate immediately into revenue.

Revenue recognition will trail our cash receipts as has been the case in the past. For example, this quarter we received $1.8 million in cash on contract payments and only recognized $1.2 million in revenue.

Spending for the September quarter was as with expected overall with litigation being higher than we had anticipated. We spent $17 million in operating expenses, which was up 6% from last quarter and down 12% from the same quarter last year. Cost of litigation was up $400,000 from last quarter at $2.8 million and down $4 million from the same quarter last year. Litigation expense was in the range that we had anticipated.

Operating expenses, excluding cost of litigation, were up 4% when compared to last quarter, and they were up 13% when compared with the September quarter last year. The increase over last quarter is primarily related to the Rambus Developers Forum in Japan and increased R&D spending for Yellowstone.

From a profitability standpoint, this was another good quarter. Net income for the fourth fiscal quarter was $5.9 million, or 24% of revenue, compared to $5.9 million in the previous quarter and $6.5 in the same period last year. This profitability led to strong cash flow for the quarter. Our cash, cash equivalents, and marketable securities during the fourth fiscal quarter increased to $169 million from $163 million last quarter and $156 million as of September, 2001.

The balance sheet continues to demonstrate the strength of our financial model. We announced last October our intent to repurchase up to 5 million shares of our common stock over an undefined period of time. As of the end of September, we have now repurchased 3.9 million of the shares authorized. This was at a total cost of just under $24 million for the fiscal year.

A key objective of the program is to reduce the dilutive effect of employee stock options. We met this objective in 2002, as we only had net stock options granted of 1.2 million. In the quarter just ended, we repurchased 1.4 million shares at an average price of $5.51. For the fiscal year, we repurchased the 3.9 million shares at an average price of $6.12. The volume of purchases will vary by quarter based on the opportunity.

Earlier today, the Rambus Board of Directors authorized the repurchase of an incremental 5 million shares over an undefined period of time. This is in addition to the 1.1 million shares that remain from the previous authorization. At the end of this fiscal quarter, we had average basic shares outstanding of 98 million and dilutive shares outstanding of 99 million.

Now I'll give you some guidance on what to expect in the first fiscal quarter of 2003. 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 materially from what I'm about to review.

We expect revenue to be up 0-5% from the revenue that we recognized this quarter. We expect that spending will increase next quarter. In non-litigation operating expenses, we expect that spending could be up by as much as $400,000. This is primarily driven by increased investments in RaSer and Yellowstone businesses. If we are successful in finding another Yellowstone contract, we could increase spending even further.

Litigation spending is always difficult to predict, because we do not control timelines and requests from the courts, nor do we control the actions that our adversaries may take, which cause us to incur more expense. Based on what we know today, we believe it's likely that litigation spending will be about $5 million in the first fiscal quarter. This is an increase of $2.2 million over the most recent quarter. This is very dependent on the schedule of discovery for the FCC trial, which is scheduled to begin next February.

Finally, we are expecting a tax rate of 32% for fiscal year 2003. This reduced rate is based on our best estimate of our tax liability at this point for next year. If you add up all this guidance, the result is earnings per share of about 5 cents for the September quarter.

As I mentioned last quarter, we think that RaSer and Yellowstone could account for over 10% of our revenue by the June 2003 quarter. We have a lot to do to accomplish this goal, including signing new contracts, but we think is a reasonable assumption at this stage.

On the subject of litigation, I will quickly review the major items in our litigation timeline. Let me start with an update in the U.S. We are still awaiting a decision on our appeal of the Virginia case against Infineon. We are awaiting this decision from the Court of Appeals from the Federal Circuit, which we hope to receive by the end of the calendar year. The other private litigation against my Pionex and Micron is largely on hold pending the outcome of the Federal Circuit. Although, we are seeking to amend our complaint in the [Hinex] case to add new patents.

The other major action in the U.S. is with the Federal Trade Commission. The FTC has now published a schedule that involves extensive discovery over the next few months and a trial beginning at the end of February. The shareholder suit in Northern California is scheduled for a hearing on November 1st for our motion to dismiss. This was delayed from the date that we gave you last quarter. There is also a suit from a company names Holiday Matinee which alleges that DRAM pricing is too high as a result of Rambus royalties. We continue to believe that this suit has no merit.

In Europe, the major activity this past quarter was the validity hearing with the European patent office. We reported the mixed results of the hearing earlier in the quarter. We are still awaiting the written report, which could be issued at any time. The verbal ruling found our patent to be valid after we amended the language of one of the claims to include more of the language that was used in the claims of the original 1990 filing. We intend to appeal the requirement that we add this language once we get the EPOs ruling in written form. The effects of the EPO decision on the infringement cases in Manheim, Germany against Infineon, Micron and [Hinex] will be more apparent once the written decision has been received.

That covers the key financial and legal issues for the fourth quarter of fiscal 2002. So now I'll turn it over to Geoff for some comments on our business.

Thanks, Bob. And good afternoon, everyone. Today, in spite of a number of successes over the last quarter, I'm going to keep my comments brief. We'll be hosting an analyst meeting at the end of the month, where we will cover our business and our strategy in more detail.

I'll start with the RaSer serial link business. To refresh you memory, the RaSer serial link technology is a family of analog macro cells that can be integrated into ASIX and standard product chips to implement the physical layer of a wide range of communications and computer applications. Today, most serial links are available as stand-alone chips. But the trend is towards integration, requiring these links to move on to high-scale integrated devices. And this ties well into the Rambus business model of providing well-engineered circuit and systems support to our customers to integrate into their chips. Using Rambus RaSer cell for integration allows system designers to save resources, money, board space and power consumption over the stand-alone chip alternative.

The 1 gig to 3 gig RaSer cells are application proven and available now. These cells lead the industry in their low power and small area. To date, we've executed 16 RaSer cell licenses and we expect first revenue recognition of royalties on volume production shipments early next year. RaSer-based chips are undergoing production qualifications at a major OEM. We have partners who've made the transition now from design to product, with four partners having sampled their RaSer-based working chips to customers. We continue to demonstrate progress toward our serial link technology road map for higher performance serial links.

In July we announced and showed the industry's first 6.4 gigabits per second integratable serial link called RaSer-V. We expect to be leaders in delivering 5 and up to 10 and beyond gigabit per second serial technology. We are executing on the road map we laid out last October. The RaSer-V's link cell running at 6.4 gigabits per second is the first step in our move towards ever higher performance in serial link technology. Our solution is based on what we believe to be well differentiated and well protected intellectual property.

The second area of innovation that I want to discuss is our ultra-fast next generation memory interface technology, code named Yellowstone. We first unveiled this technology just about a year ago. We publicly demonstrated the technology running at 3.2 gigahertz in July. Yellowstone's signalling is initially a 3.2 gigahertz technology, but we've plans to go to 6.4 gigahertz. We've had customers express interest in using Yellowstone technology, as well, to enable chip-to-chip interfaces, and we're now evaluating the business prospects of enabling non-memory, high-speed chip-to-chip interface technology based on Yellowstone.

At the microprocessor forum next week, we will again demonstrate Yellowstone technology running at 3.2 gigahertz. We have signed one small Yellowstone services contract to help the major semiconductors company with their preliminary investigation, and we hope to have our first significant customer contract signed by the end of the year.

Now I'll make comments about RDRAM. We're very pleased that for the third year, the maximum PC dream machine was an RDRAM-based Pentium IV. The other great milestone for us this quarter was the validation of Intel's 850E chip set with the 1066 megahertz RDRAM. This was the second chip set for the Pentium IV that supports 1066 megahertz RDRAM. SIS announced their solution in July. We were excited and happy to see Dell and Gateway begin shipping 1066 RDRAM systems earlier this week. We are pleased to have ongoing momentum for PC space for performance desktops.

We believe that the next logical and evolutionary step for high-performance desktop chip sets is a four-channel RDRAM chip set. We are talking to chip and system companies about this now, and our analysis shows that this would be a phenomenal product that would meet the needs of the performance desktop for the next few years.

In a consumer networking space, new products continue to come to market that use RDRAM. We announced the work with TI's digital light processing chip set this last quarter. This is an exciting program for us because it will help drive RDRAM into business projectors and digital televisions. We announced Samsung's intent to use this technology in their digital televisions that are already beginning to ship in the United States. The picture quality is fantastic, and RDRAM helps make this happen. I should also note for some time Panasonic and others have been shipping HDTVs, as well, in Japan.

In addition to developing great technology, we are working hard on getting the word out about our innovations. We will be active participants in the industry's first chip-to-chip interface conference that's scheduled for October 28 in San Jose. We'll also be holding our U.S. Rambus Developer's Forum the following day on October 29 in San Jose. These venues will provide an excellent opportunity for our partners and Rambus to get the message out on the key advantages that we offer as the leading high-speed chip-to-chip interface company. As well, we will host an analyst breakfast meeting on October 28 at 7:30 A.M. Pacific Standard Time in San Jose. This meeting will be Web cast so that all our interested shareholders can listen, as well. That's the end of our prepared remarks, and so now we'll open the lines for questions.

At this time, I would like to remind everyone, in order to ask a question, please press start then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from John [Klauss] of Morgan Stanley.

Two questions, if I could. One, could you expand a little bit on Yellowstone, and basically the expectation on licensing? Would you expect that you would have service types of contracts initially? And then moving to another phase, could you just talk about how you expect that to unfold. Second question will be on the legal expenses; are all the incremental legal expenses basically for the FTC discovery or is part of that kind of a place-holder for the expected litigation during the quarter?

On the Yellowstone, John, the services contract is unusual in our past experience over the last ten years. Generally, there will be an evaluation phase, but not one that would involve a small services contract and we go straight to a license. So we don't expect that to be the norm.

In terms of our expectations on the rate of signing customers, of course, we don't have a crystal ball. It's just our best guess based on the interest we are seeing, and we are talking to multiple customers, that we would expect their first deal to happen sometime later this quarter. Bob, could you comment on the legal?

I'll take the second one. In terms of the legal expense projection, the big driver is certainly the FTC, and that accounts for over half of the 5 million expectation that we set. But we're also assuming at some point we will hear from the Federal Circuit and that the private litigation will come to life again, so we need to make sure we have money in the budget for that, as well.

Okay. Best guesstimate for the Court of Appeals by the end of the calendar year.

That's what we've been saying. Frankly, it could be any time, and there's nothing that says it has to be by the end of the year. But that's the expectation we've been setting for quite a while.

Okay. Thanks, very much.

Thanks, John.

Your next question comes from Mike Crawford of B. Riley and Company.

Could you talk more about SIS's chip set; where they are with the 658 and where they might be with the DX version of that chip that is supposed to be faster?

The 658 chip set has been available since the July announcement. They are in the process of engaging with OEMs. The exact details, of course, are confidential between the OEMs and SIS until they make announcements. We think they are seeing some significant interest in the chip sets and are engaging customers in discussions and more, both in the U.S. and Taiwan. I'm not sure what you mean by a DX chip set, Mike.

I guess it's been reported that they might be producing one that would go at 1333 instead of 1066?

I don't think there's been any announcement of that. There's always rumors. As with most of our partners, we're under NDA, so we can only comment on what's public and that's the 658 at 1066 megahertz at this time.

Okay. And on Four Channel Rambus, what would you see first, contract revenues related to that?

Oh - Four Channel.

Yes.

Well, with like any Silicon chip, it would take time to design. If somebody was starting now, it would be a year from now to be available, as a rough estimate. And, of course, then customers have to put it into production, as well. The earliest would be late next year and probably more into the year after, early 2004. As an estimate.

Okay. And is there any sense of what the application might be for the semiconductor company that is in the evaluation phase on Yellowstone?

Well, of course, we couldn't say, but our target customer base for Yellowstone is those people that need the highest performance from just one or two DRAMS, and those are folks who are doing graphics, game consoles, high-performance digital video processing, high-performance computer networking; and those are the kinds of customers that are showing interest and are having discussions with us now about Yellowstone.

Okay, thank you.

Thanks, Mike.

You're next question comes from Michael Cohen of Pacific American Securities.

Hi, Bob. Hi, Geoff. Congratulations on the sequential revenue increase. In the last quarter, you had your RDRAMs revenues -- or royalties -- sequentially declining, and this quarter they're sequentially increasing. What's causing that kind of about face for RDRAM in the face of DDR and RAM?

I gave a little more detail on that, as well. It was really the RDRAM controllers that were driving the sequential RDRAM growth, overall. So, what it means is that we are seeing good adoption of our applications right now, including -- and good volume in products like the Sony Playstation 2, and we're beginning to see some reasonable volume in digital TVs, as well.

So this is primarily coming from the non-PC space.

The controllers, yes.

Okay. The next question I have is your contract revenues are sequentially declined. Is a lot of it still being influenced by RDRAMs, or should we kind of view this as the activity that's going on with both RaSer and Yellowstone?

Well, what drove the decline this quarter was the completion of a contract with one of the direct RDRAM companies, so that is, in fact, what caused it. Going forward, there will be some RDRAM contract revenue, and then our hope is that it will be dominated by RaSer and Yellowstone over the next couple years.

On a cash basis, were your contract revenues flat to increasing or also declining?

On a cash basis, I mean that was what I mentioned; we actually brought in $1.8 million in cash on the contracts this quarter and that's an increase from the previous quarter.

Okay. Thank you, very much.

Thank you, Mike.

Your next question comes from Jeff [Schwino] of MS Capital Management.

Hello, guys. How are you doing?

Fine.

Bob, one question for you: What was Cap Ex in Q4?

I don't have that right in front of me. It was probably -- I would guess it was in the neighborhood of $1 million. Maybe a little bit less than that.

And what do are you guys holding in the longtime marketable securities?

It's largely agencies, and our policy is triple-A or above, which means we're mostly in agencies.

What's your current yield from that?

I don't have that in front of me, either. You can imagine the yields are coming down.

Certainly. Have you guys ever considered possibly liquidating some of those agencies and using some of that capital to increase the buyback?

I guess it's fair to say we've had that discussion, but we're not making that kind of decision at this point.

And can you comment on how many RDRAM units you sold for fiscal 2002?

That's not a number we've been disclosing. You're asking good questions, and I feel like I don't have data in front of me.

We always are confused.

Just one last thing, guys. We've seen a decline in RDRAM units from Q3 it was down 11% - now this is Q4, we're down about 7 or 8%. Do we see that trend kind of continuing here in terms of a more proving shipment not declining, kind of increasing?

Seasonally, we think we're hitting a better part of the year now, which should help. We're certainly excited about DELL and Gateway beginning to ship 1066 systems. So we think there's potentially some wind at our back in the next quarter or two.

Great. Sorry, this is the last one, but Geoff, you said you kept mentioning the performance segment in terms of the new RDRAM chips and all that; have we basically given up on the mainstream market segment with RDRAM?

No, but chip sets that are shipping today is the rest of the performance desktop segment.

Certainly that'd be PC 1066, but wouldn't it be logical then for you or some of your suppliers, being Samsung and the like, to slash the prices on PC800 as SDRAM and DDR continue to fall daily and PC800 and PC1066 is basically stayed stable?

Well, it may or may not be logical, but of course we don't have any control or influence over the price. And the availability of memories is only part of it. You also have to have a chip set that's designed for a particular market segment. So we have not given up on the mainstream of memory, but at this point, we're in the performance desktop as the performance leader, and that's a significant and profitable position for us, and we want to maintain and continue to work to get in the mainstream, over time.

All right. Thank you, gentlemen.

Thanks.

Thank you.

Your next question comes from Chanq Q. for [INAUDIBLE] Resource.

Good afternoon. I guess maybe two questions: One is, you are guiding -- for the next quarter you are guiding revenue of up to 5% of the growth; that's great. But on the other hand, I'm trying to understand, where is the growth coming from? Because the DRAM price since July was dropping. Can you give us where the growth will be?

Again, we are not talking about huge growth here. In our plan, the growth is coming out of the RDRAM business.

From RDRAM. But traditionally, you recognize the royalty one quarter afterward, right? Which means the December quarter you recognize the royalty basically from the shipment from July into September.

That's correct.

I see. In other words, you are basically assuming the [INAUDIBLE] will be up considerable -- or maybe depends on your royalty? You are by unit or by revenue - percent of the revenue because of per unit charge.

For RDRAM, it's a percentage of the selling price.

Uh-huh. And for DRAM?

For -- you talking about SDRAM and DDR?

Yeah.

It's, in most cases, it's also a percentage of the selling price; although, we do have a couple of fixed deals in that area.

I see. Okay. Great. The second is, can you give us a breakdown, either for the last quarter or this fiscal year, the revenue breakdown SDRAM, DDR and RDRAM?

We've been slowly sharing more and more in terms of the revenue necks. This quarter I said previously that 36% of revenue was attributable to SDRAM and DDR, but we haven't been splitting RDRAMs specifically, and we obviously don't split out Intel, specifically.

You mean RDRAM, the other 64% is RDRAM, but that's more like RDRAM than the RDRAM controller.

The reality is it's everything else we are doing, which includes RaSer serial link, RDRAM, and then the cross license agreement that we have with Intel.

Okay. Thanks a lot.

All right. Thank you.

Your next question comes from Wayne Smith of Touchstone Investments.

Hi. Just a quick follow-up on that question. I just wondered, you guys give guidance for this Intel cross license agreement of roughly $10 million a quarter, or that's basically what we could expect from that license. If I'm just backing that stuff out, I'm getting about $5 million from RDRAM revenues; is that the wrong way to look at it?

I think that gets you in the right ballpark. We never said specifically what the amount of the Intel contract was. A number of analysts have taken cuts at that.

Just a couple of questions regarding the litigation. I just wanted to get a little bit of clarity. You guys said you that you had some -- another appeal I guess with the FTC litigation that was going to be in the court pretty soon. What was that date again?

Well it's not on an appeal with the FTC. This is the trial related to the complaint they filed against us in June. We are expecting to go to trial right at the end of February.

But are you appealing that to try to get it thrown out? There was one you said you were trying to get something dismissed, and I thought it was with [INAUDIBLE].

That probably was my comment on the shareholder's suit.

Okay. And as far as the ruling that you guys had in Europe, I was just trying to understand what the -- because I was a little confused by the press release, and then there were varying reports in the press interpreting it so I couldn't really -- I wasn't quite sure how it all fell out. Can you explain to me, my understanding of it now is that they upheld the patent as it was first submitted but then there were some additional changes that were made to it that they said those were thrown out, basically? Is that how I should be interpreting your release?

Let me back up a second. First of all, we don't have the final written opinion from the EPO. We are waiting to see that like everyone else. Verbally, at the hearing, we were asked to put language back into one of the claims that was more similar to the original language that was used in 1990. So we need to wait and see what the written opinion is, and then we'll figure out where we go from there in Europe.

So your official appeal, you haven't officially appealed it, then, but your intention is to do that as soon as you get what you think the details will be?

Based on what you heard verbally at the hearing, that's our intent. The good news out of that hearing was that our opponents put forward a lot of prior art, and we were able to work our way through all that and end up with a valid patent.

Gotcha. And then just as far as the litigation expense, I know especially over in the European cases and since this has dragged on quite a while, I'm just trying to get a sense of do you guys have any sence of what the magnitude it? Because I know that they can - if Europe if the plaintiff wins, whoever wins supposedly can get the fees, all their legal expenses reimbursed, that type of thing. I was just wondering, do you guys have any sense of that number, what the risk might be there?

I really don't at this point. One thing I can tell you is litigation is a lot less expensive in Europe than it is in the U.S., although that could potentially be a material item at some point.

Thanks for the time, guys.

Thank you.

You have a follow-up question from John Klauss of Morgan Stanley.

Okay.

It's Mark Edelstone, guys. Question, Geoff, was on the Yellowstone service contract. I wasn't sure from your explanation, was that an agreement that was made directly with the DRAM manufacturer or with a third party that was consulting to that DRAM company.

It was with a semiconductor company interested in a license, and they wanted to do a level of evaluation which was unusual, and so we mutually agreed on a small engineering services fee so that we could dedicate engineers to work with them to enable them to do the evaluation that they want. That will allow them to then make a decision on a license.

Okay. So you were not suggesting that was necessarily a DRAM company, it was the semiconductor company may be making DRAMs or may be not.

Or some make lots of things.

And then, is there any stipulation in that contract that there would be milestones already agreed upon as to what would cause that to become a full license?

There's nothing that obligates them to take a license, no.

Okay.

It's strictly -- they'll do a technical evaluation, and if they're happy and it fits their business objectives, presumably they would then want to do the next step.

Okay, and the terms of that would be left to be decided in the future, or have you already agreed upon what the terms would like if they were to get into a full license.

The terms were not in the services contract.

Okay, great. Thank you, very much.

Thanks, Mark.

Your next question comes from Greg [McClellan] of [Holder Bank Pomerantz].

Okay, and we're going to have to have this be our last question I think.

Thanks, guys. Real quick, I was kind of surprised the other day to see the announcement by both -- well, ETI, I guess, talking about DDR 3. I wonder if you could comment on why do you think these guys would go after an seemingly inferior technology to what you guys already have on RDRAM, let alone Yellowstone. I guess I was hoping to see maybe you guys in that space.

Well, we don't really know what it is, so it's hard to be able to speculate. They said a specification was available. but to my knowledge, all that was issued was a press release, no specification. The time frame of interest seemed to be next year's production from the tone of their press release. So that would be out of the range of Yellowstone technology. We don't know. We don't know what's in their minds, and we don't have enough technical information to be able to have even an intelligent speculation.

All right. Thanks, guys.

Thank you. Thanks, everybody, for listening. I'd like to remind you of the analyst's breakfast planned on October 28. Breakfast will start at 7:00 and then we will be Web casting the presentation beginning at 7:30. Hope to see many of you there.

Thanks very much.

Thank you for participating in the Rambus fiscal year end and fourth quarter results conference call. This concludes today's call. You may now disconnect.