Rambus Inc (RMBS) 2003 Q4 法說會逐字稿

Good afternoon. My name is Jeff and I will be conference facilitator. At this time I would like to welcome everyone to the Rambus quarterly earnings conference call. [OPERATOR INSTRUCTIONS] Thank you, I would now like to turn the conference over to Bob Eulau, you may begin your conference.

Thank you operator. Welcome to Rambus's conference call covering the financial results of our fourth quarter and fiscal year ended December 31, 2003. My name is Bob Eulau. I'm Rambus's chief financial officer, Geoff Tate, our chief executive officer and John Danforth, our general counsel are also joining me on the call today.

In the first part of the call, Geoff will discuss our business results. Then I'll provide a summary and analysis of the company's recent financial results. And then John will follow with an update on litigation. We will open up the lines for Q & A. Geoff, John and I will be available for questions.

The press release for the results discussed here today has been filed with the SEC on Form 8-K. If you have not received it, it's available on our Web site at www.rambus.com on the investor relations page under financial releases. A replay of this conference call will be available for the next week at 800-642-1687. You can hear the replay by dialing toll free number and entering ID number 480824 at the prompt. In addition, we are simultaneously Web casting this call, and it can be accessed on our Web site, beginning at 5:00 pm Pacific Standard Time tonight.

Before we begin, I need to advise you that the discussion today will contain forward-looking statements regarding our financial prospects, pending litigation and demand for our products among other things. These statements are subject to risk and uncertainties, which are more fully described in the press release and other documents that we file with the SEC including our 8-K's, 10-Q's and 10-K's and these statements may differ materially from our actual results. So, now Geoff will make some comments on the business.

Thanks Bob and good afternoon everyone. 2003 was certainly an important year for all of us at Rambus. I'm incredibly proud of our engineers who have worked tirelessly throughout the last year to deliver the requirements our customers needed in order to be successful. 2004 is shaping up to be an even more exciting year as we look forward to continuing to help our customers solve their most challenging interface problems.

Starting with an update of our memory interface division, Q-4 was an important quarter for us in several fronts. First in late December, Toshiba announced that they are sampling five 12 Mega bit XDR DRAM's with a data transfer speed of 3.2 Giga Hertz making it the world's fastest DRAM memory device. This XDR DRAM is well positioned to initially serve the high bandwidth needs of consumer graphics and networking applications with the eventual applicability for PC main memory server and mobile systems.

At the microprocessor forum in October, we unveiled our roadmap to bring XDR DRAM to the main memory market by 2006. As CPU speed increase and as new operating systems and software applications come to market, we think PC main memory requirements will quickly outgrow the limits of current mainstream memory solutions. Running at 3.2 gigahertz, XDR DRAM offers eight times the bandwidth of today's best in class memory. The differential signaling of XDR DRAM further allows it to scale to 6.4 gigahertz and even beyond providing PC's with unprecedented levels of memory performance.

Also during the microprocessor forum, we demonstrated Toshiba's basic evaluation chip that incorporates Rambus's parallel logic, code named Redwood. The Redwood is designed to run at speeds up to 6.4 gigahertz, six times faster than processor buses available today. This evaluation chip is being used as a test vehicle for future customer platforms. Redwood interface has been designed for high volume, cost sensitive applications.

Next, in November, a sustech announced a PC motherboard that incorporates the SAS R659 chip set with four channels of RDRAM memory and preliminary benchmarks are encouraging. This motherboard is undergoing internal qualification testing and sustech anticipates key channel OEM's this quarter and we were hoping for earlier production plans their current mass production plans will be based on OEM evaluation and feedback once they sample. We had a great year and strong quarter with the memory interface, now I'll move on and update the logic interface business.

I will start with why the Valyo asset acquisition and people who joined us from Valyo are important to us. These assets allow us to broaden the current portfolio to include products that are or will be more optimized for applications requiring lower power at a different level of performance in our present RaSer product family. Combined with the existing RaSer product portfolio, we believe we can now provide a broader set of solutions optimized for specific applications for broader range of customers. Additional, at the Valyo interface products implements in UMC's fabrication process while our current designs are implemented primarily in TSMC's fabrication process. We expect therefore, the acquisition of the Valyo interface assets will allow us more flexibility, meet our customer's needs in fab processes.

I'd like to take this moment to compliment everyone on both sides of Rambus and Valyo for making this a smooth and efficient trance action and transition, and welcome to the Rambus family all of the employees joining us from Valyo, in Chapel Hill, North Carolina, and those employees adjoining us in Silicon Valley, following the asset acquisition.

Our RaSer products enjoyed a strong year, and we expect the momentum will continue into 2004. We have now signed over 25 license contracts with customers to use our RaSer Cyril link technology, which is an increase from the 20 we reported during the Q3 earnings call. Two of the newest companies who use our technology include Stargem, who is using the RaSer FIIP in the development of its star express product line and S3 graphics that licensed the RaSer spell for PCIS connectivity in the graphics performers for desktop and mobile PC's.

As we mentioned before, we believe that the PCI Express is poised to become a strong interface in the coming year, and we feel we're well positioned to help our customers transition from the well known PCI interface to the much fast faster and new PCI Express interface.

We're very proud of our accomplishments in the past year and look forward to continuing the momentum into 2004 and we're help our customers solve their most challenging interface problems. I also have a management announcement to make today. Our president and board member, Dave Mooring is changing responsibilities and will become an executive board member and no longer serve as president. He does remain on the board and remains as a corporate officer. We have signed an employment agreement with Dave that calls for a minimum of a year of his full time services, followed by a minimum one-year part-time role. Now, Dave's focus will shift away from the operating business units that he has been managing and in his new role, he will work with me on licensing strategy, corporate development as well as mergers and acquisitions.

Dave and I both think that flattening our organization for 2004 is the right thing to do, for effectiveness. I'd like to thank Dave for his leadership as president over the last four years. Dave has been with us for 12 years so far, and in addition to shaping, our strategic direction and driving our product and marketing plans along with me, Dave is being instrumental in creating partnerships and agreements that have been key for our years of success of quarterly operating profits. During 2004, I am hopeful for increased licensing and settlement opportunities plus new acquisition opportunities such as we did with Valyo. And Dave services in these arenas will be valuable to us. So, now Bob will give you an update on our fourth quarter financial results.

Thanks, Geoff. Our Q4 results were an excellent finish to 2003. Our fourth quarter results reflected solid top and bottom line results. For the fourth quarter, our revenue growth was excellent at 26% over the same quarter of the prior year. Our net income was up 56%, over the same period last year. And in fact, our Q4 net income was the highest it has been for any quarter since the December 2000 quarter. This quarter's results were driven by revenue slightly above guidance with spending at the low end of our guidance. The spending was low due to what we believe was a temporary lull in litigation spending. Net income also benefited from a favorable adjustment to the valuation of our strategic investments.

For 2003, revenue was up 21% to 118 million dollars. Net income for 2003 was down 3% to 23.2 million dollars. In addition, to the strong quarterly results, we also completed the acquisition of certain assets from Valyo Corporation at a cost of 13 million dollars and in cash. Now for a bit more detail on revenue, total revenue for the quarter was 32.4 million dollars, up 26% over the same quarter last year, and up sequentially 13%. Total royalties for the quarter were 27.8 million dollars, which is up 14% from the same period last year, and up 13% relative to last quarter.

During this quarter, XDRAM and DDR royalties were up sequentially approximately 26% for memory devices and controllers combined. If you exclude the Intel cross-license agreement, the revenue specifically coming from XDRAM and DDR memory and memory controller royalties comprised about 46% of our revenue for the December quarter. Overall, our DRAM interface royalties were down 43% from the December quarter last year, and up 4% from last quarter. Royalties coming specifically from RDRAM memory and memory controllers are less than 10% of the total revenue. It appears that we may be through the decline in RDRAM royalties since it was tied to the decline in royalties associated with the PC business. We continue to a relative steady royalty stream from shipments of consumer products.

Contract revenues in the fourth quarter of 2003 were 4.6 million dollars, up 234% over the same period last year, and up 15% from last quarter. The increase in contract revenues reflects the revenue that we are recognizing for the XD RDRAM memory interface and redwood contracts. We received about 6 million dollars in cash on contract payments this quarter. We completed a number of contractual commitments to led to large bills late in the quarter and resulted in a significant increase in our accounts receivable balance as of December 31.

Total costs and expenses for the quarter were 21.3 million dollars. This was down 900,000 dollars, or 4% from the previous quarter, and up 2.4 million or 13% from the same quarter a year ago. Cost of litigation was down about 2.4 million dollars or 51% from last quarter at 2.3 million, and down 2.2 million when compared to the same quarter last year. Operating expenses excluding cost of litigation were up 8% when compared to last quarter, and they were up 32% when compared with the December quarter last year. With the increase largely attributable to the planned ramp up for XDR DRAM redwood and RaSer interfaces.

Net income for the fourth quarter was 8.6 million dollars or 27% of revenues. Compared to 5 million dollars in the previous quarter and 5.5 million dollars in the same period last year. Our continued profitability and the exercise employee stock options led to strong cash flow for the quarter. Our cash, cash equivalents, marketable securities and restricted investments during the fourth quarter were 193 million dollars were up 11 million dollars versus 182 million dollars last quarter and 188 million dollars as of December 2002.

During the fourth quarter, we acquired certain assets from Valyo Corporation for 13 million dollars in cash. These assets were almost entirely intangible assets that will be amortized over a period of ten years and tested annually for impairment. Along with the acquisition of these Valyo assets, we also hired 14 people from Valyo, and assumed certain commitments to one of Valyo's former customers. We expect to recognize approximately 4 million dollars in revenue in 2004 as a result of the Valyo transaction. In 2004, we will be recognizing the expense for the 14 new employees, and we expect to recognize approximately 1.3 million dollars in expense associated with the amortization of the intangible assets that we purchased. As a result of the transaction, we expect that 2004 earnings will be 1 to 2 cents below what we otherwise would have expected for the year.

We did not repurchase any shares this quarter, but we continue to view our share repurchase program as an ongoing long-term program. We have remaining authorization from the board to repurchase up to an additional 3.8 million shares. At the end of this quarter, we had average basic shares outstanding of 98 million and diluted shares outstanding of 109 million. Now I will give you some guidance on what to expect in the first quarter of 2004. This guidance obviously has a lot of uncertainty associated with it. This guidance reflects our reasonable, best guess at this point in time and our actual results could differ materially from what I'm about to review.

We estimate revenues would be in the range of between 32 million dollars and 35 million dollars. And we estimate that our operating costs and expenses will be in the range of between 22 million dollars and 26 million dollars. Overall, spending is likely to be up because of investments in our RaSer, Cyril link business and litigation spending. Litigation spending is always difficult to predict because we do not control the timelines and requests from the court, nor do we control the actions that our adversaries may take, which cause us to incur additional expense in any particular quarter. Evidence that is produced in hearings can also cause us to change our plans. Based upon this, we estimate that our litigation expenses will be in the range of 3 million dollars to 5 million dollars, but this range is very dependent on the activity of our ongoing litigation.

We are estimating net interests in other income to be between 900,000 dollars and 1.1 million dollars. Finally, we are estimating a tax rate of 35% for 2004. The effective tax rate for 2004 is increasing due to the expected improvement in pre-tax profits and the expiration of certain R & D tax credits in the U.S. in June. The R & D tax credits have been reinstated in the past and if this occurs, we will re-evaluate our effective tax rate for the year at this point in time.

One final area that I would like to discuss is affiliating trading policies and activities. Rambus has an objective to insure that its directors and officers are motivated to work towards the financial success of the company and at the same time comply with all applicable insider trading laws. We also recognize that directors and officers will choose to diversify their holdings from time to time. Last year, the board approved a change to our insider trading policy to allow directors and officers to adopt what are commonly known as 10B 51 trading plans. These plans allow directors and officers to agree in advance on a pattern of recurring sales for a defined period.

Two officers, John Danforth and I adopted these plans last October. And within broad constraints, you will begin to see periodic sales of some of the holdings pursuant to these plans. With the individuals we announced last quarter, four of our section 16 directors and officers have adopted 10B 51 trading plan. In the future other officers and directors may choose to adopt similar plans. At this point, John will give you an update on litigation.

Thank you Bob and good afternoon everyone. I'm very pleased to be here and to be able to provide some litigation updates today. In what follows I will review some of the major items in our litigation timeline, and some of the recent events and developments and as we had some reports. Let me start with an update in the United States. In the ongoing patent litigation against Infenion, we are heading to a retrial of various claims in Virginia, the Federal District Court there based on the outcome of our successful appeal to the federal circuit last year. We had a status conference with the Virginia judge last week. At that conference, the judge ruled that the trial would start on May 10th. This date was confirmed in the face of a stay application by Infenion that had it been granted would have delayed the trial for up to two to four years.

Among other rulings last week was one that as we indicated in our press release, pared down the number of patent claims that we can present to the jury on retrial. As things now stand, we will have three Rambus patents to litigate at trial. From those patents, there are four patent claims on which we can base a finding of infringement. At the start of the case, which was in August of 2000, we began with one additional patent, that's four in all and with many more claims. However, last week, the judge removed some claims from the re-trail. This was based on his rulings in the original trial and his conclusion that our appeals to the federal circuit did not cover those other claims. Although we respectfully disagree with the judge's imposition of this limitation, some of the claims affected covered similar subject matter to the claims that remain. Most of the claims affected were what patent lawyers called dependent claims. Infringement purpose, dependent claims would have required to us prove more than we now need to prove to show infringement by Infenion must be claims that remain in suite. In other words, they would have required to us prove more about the inter circuitry of Infineon's memory product than we now have to prove.

Some of the key events in the pre-trial schedules in Virginia are as follows. This is from a pretrial order, a draft pre-trial order that the parties agreed upon and submitted to the court two days ago. On February 2nd, there will be a telephonic hearing on discovery motions and a possible motion by Infineon with the pleadings. On February 12th, there is a deadline by which time Infineon must if it wishes file papers to try to move aside the existing court of appeals rules and the existing judgment in Rambus's favor from the court of appeals based on any allegations Infineon seeks to make concerning Rambus documents. If there is a motion by Infineon, the hearing is set for March 8. By March 26, all fact and expert discoveries are to be completed. On April 15, there will be a hearing on any motions for summary judgment. By either side, or any motion of liminis by any side. As briefs proposed orders, and formal rules from Virginia are available, we will be posting these on our Web site to the extent practical. We have got many requests along these lines. Our summaries of case developments from time to time must be of necessity incomplete. We recommend that those interested to review the Virginia docket, and proceedings and pleadings and the court's orders and transcripts for them to get a fuller and more complete picture of the litigation as it unfold. We expect to post contact information on our Web site to help with this.

I wanted to add a couple of additional thoughts about the Infineon case now that we have confirmed trial date again in Virginia. For all of the reasons discussed here, in our pleading, and in the federal circuit opinion, we are indeed optimistic about our position now, and the ultimate outcome. However, any jury trial carries uncertainties and we cannot make predictions about what will happen at any stage. This has been and will continue to be a hard fought case.

Please recall that when the Supreme Court ruled against Infineon in October, when it confirmed the court of appeals decision favoring us, Infineon stated that the "ruling was unfortunate", close quote, and it would continue to defend itself vigorously, and quote, "through all appropriate legal means", close quote. Among other things, we believe Infineon will do all it can to pursue issues that could adversely affect more than just a small number of patents at issue in this particular case. Our experience has taught thaws some pretrial rules may be adverse to us, and this, of course, may shape the trial in ways that are not to our liking.

So, on the one hand, we are mindful of the stakes of this case and of the strong motivations and track record of our adversary. On the other hand, we very much like the patents and claims that remain in this case to be tried in may. The patents are our 263-804 and 918 patents all of which were issued by the patent and trademark office shortly before we filed our suit in August of 2000, but all of them, despite that late issuance date share the same 1990 priority date for validity purposes. The specific claims that are going -- that are currently at issue are independent claim one, and dependent claim two of the 263 patents. Independent claim 26 of the 804 patent and independent claim 18 of the 918 patent. These claims cover latency features; program burst features and the use of a DRO on a memory chip. Three features in all.

All three of these features are used by the infineon DDR memory chips at issue in this case. The latency and burst features are used by the infineon DRAM chips. As we assess things, we look also at the bigger picture. Also at the bigger picture. The three Rambus patents we originally elected to sue on in 2000 -- there were four in 2000, many others have supplemented the three that remain from the original group of four. More recently issued patents that are owned by Rambus and that pertain to the products at issue, and cover a variety of other features of this same product. More such Rambus patents are issued on a regular basis now, and some of those additional newer patents are already, for example, being used to challenge a broader range of DRAM features in the hinix case, which I will address in a moment.

In addition, of course, the bigger picture and the longer term prognosis for our litigation must include some assessment of the FTC case against us for which there was a hearing last summer and the ongoing DOJ DRAM price fixing investigation. I wanted to just discuss both of these in a moment.

As to the litigation against hinix, discovery is ongoing with a trial date in a federal court in California, currently set for November 2004. A mark man that has claimed construction hearing is set for March 23, 2004, in the same California court, in the mark man case. Summary judgment motions were filed by both parties in the hinix case on Monday of this week. Our summary judgment motion seeks a finding of infringement as a matter of law of seven Rambus patents at issue in the hinix case and 40 Rambus patent claims at issue in that case. The motion is based in part on the court of appeals claim decision in the infineon case, that is to say, it's based on the claim construction that the court of appeals has handed down and we believe are applicable to those claims.

The summary judgment motions will be heard in the California case, the hi nix case on the same day as the mark man and high nix case which is again March 23. In the private litigation against mychron, there's nothing currently on the Delaware court calendar and no update since the last quarter. Other major litigations related news in the U.S. has been with the FTC and a limited extent, the department of justice price fixing investigation into the DRAM industry.

In December, the Federal Trade Commission administrative law judge requested and was granted an extension of the deadline for him to complete his initial opinion. That's the initial opinion as far as the trail that was conducted last summer. The new deadline for that initial position is February 17 of this year. That date may be extended again. On the or - the all standing issues opinion before that deadline. After this opinion is issued the next step we would have commissioners of the FTC review the case and vote them weather or no to adopt the findings of the administrable war judge It is expected that the full commission could take up to a year or more to render its decision on the recommendation of the administrable war judge.

Following that review, Rambus would have the right to seek an appeal to a circuit court of appeals in the United States, as to the department of justice, we are watching with great interest, the latest developments following the plea agreement announced in December, relating to a mychron sales person's destruction of documents and obstruction of justice in the context of the department of justice ongoing DRAM price fixing investigation. The Department of Justice issued a press release on this topic. We have filed evidence and pleads with the federal trade commission that deal with some related matters, and you can look at our proposed finds of fact somewhere around proposed finding of fact number 16 to see our position there. In Europe, the European patent office is scheduled the appeal here hearing regarding the availability of the European patent. The hearing will take place on February 10 and 11 of this year. It will deal with prior art issues relative to that patent, and Europe specific rule that is contrary to U.S. practice and deals with the broadening of claims beyond what they covered. While there was a preliminary non-binding opinion in Europe late last year that was negative we are optimistic it will not be the final ruling. We understand it was highly tentative and our experience is that the preliminary opinions from the EPO have limited predictive value. Also in Europe, the -- court has scheduled the next infringement hears in the infenion and Mike Ron cases in Germany for may 14, 2004, although we have requested because of the infenion trial this be deferred to June 18, 2004. This covers the key events that we have in the next quarter and some of the recent results in litigation area, and so now, with great thanks, I'll turn this back over to Geoff for --to Bob for questions and answers.

OK. Operator, we're ready for questions.

[OPERATOR INSTRUCTIONS]

Your first question comes from Jeff Shriner of M.S. Capital management.

Good afternoon, gentlemen. Thank you for all of the information today.

Hi, Jeff.

Any comments on the joint development with Synopsis, something was said on the last quarterly conference call that there was a joint development in progress and weigh might have some type of an announcement in December.

I believe that at a recent industry event we demonstrated our PCI Express working with the Synopsis protocol level code. I forget exactly which conference that was.

OK. And then, Bob, should R & D expenses increase year over year with the Valyo acquisition?

You will see increase in R & D, I would say half of the amortization will go to R & D, obviously, some of the employee costs will go there and you'll also see about half of it showing up in cost of contract revenues as well.

OK. And then one last question. Any expected royalties from the RaSer product line in Q1?

I think it's too Earl hardly for us to tell, although, we'll certainly disclose at the point in time when we are able to recognize royalties there.

Thank you very much.

Your next question comes from Mike Crawford of B. Riley & company.

John, in what scenario would you be in a position to seek an injunction requiring infenion to seize or prepare to so DRAM production?

Hi, Mike. It's John. We would take the case to trial in May, we would need to succeed at the trial and then we would apply for an injunction if we succeeded.

And OK. Great. And then Bob, could you help wrap some sizes around some of your other revenue opportunities including memory controllers and studies markets?

Well, yes, it's a little hard to do. We did share some information at the analysts' meeting, which I think you saw in November. You know, a lot of the opportunity, first of all, on the logic side is a function of the semiconductor industry and what the need is for high speed interface out a few years from now, today and a few years from now. So, we think there's very good size market opportunity there, but we haven't been specific in terms of quantifying it. Go ahead.

Oh. You still expect ether net interfaces to be the first RaSer royalties?

I don't know that we ever specifically said that, and you know, we have got -- there's several customers working on products that are, you know, integrating our solutions and we don't know which one will generate royalties first.

OK. And then another question is what is the extent to which IBM has access to Redwood and XDR DRAM and how are you compensated for that?

It's complicated in the details that I think are part of Sony agreements, which were posted with our 10-Q files back about a year ago. But through the Sony Toshiba IBM cooperation, IBM gets access to Redwood and XDR in that way.

And could they use that excess -

As stated.

Excuse me?

And we do get compensated for their use.

And they could use it even if they're doing it not in collaboration with Sony or Toshiba, but in collaboration with someone else?

You mean as if they were supplying chips to somebody other than Sony, which incorporated one of those interfaces?

Yes.

Yes. I believe there's a provision for that, and for compensating us in that regard. Although I'm not -- my memory on this is a little faulty. The agreement was more than a year ago at this time.

All right. Thank you very much.

Thank you.

Your next question comes from Erach Desai of American Tech Research.

Good evening, gentlemen. I have a couple of questions. The first one is with respect --Bob, with respect to the very nice sequential up-tick that you had in royalties, I'm going to assume that this is all due to perhaps one vendor coming up at full speed. I recall that there were two of the largest DRAM manufacturers who were paying you at reduced rate or a fixed rate and one had reverted back. So, relative to my numbers, that was a nice positive surprise. I'm trying to understand what was in there. Was there anything from RaSer at this point or could you give me some color on that?

Yes. I'll try to give you a little bit of color probably not as much as you'll be satisfied with. But in terms of RaSer, we did not have any royalties this quarter. I did make some comments on sequential royalty growth, and it was quite strong in DRAM and DDR. Within SDRAM and DDR, the strength tended to be DDR memory and S DRAM controllers. I don't want it get into specific customers. And also I believe there was slight sequential growth in RDRAM this quarter after several quarters of decline.

In RDRAM you said.

Yeah, I think it was 4% is what I said.

Right. If, of course, Sony's PS-2 was limited shipment -- well, let's not worry about the micro detail. Have you ever told us what your royalty rate on XDR is, and if not, is it fair to assume that what came out of the litigation documents with regard to the 3.5% for DDR, that XDR gets at least 3.5%.

Well, let me sort of recap what we said in the past. We had disclosed initially that the business model is similar to the RD ram business model and in one of the calls we said that the royalty rates tended to be higher than the RDRAM royalty rate. We had said for many years that the RDRAM memory device, royalty rates ran from 1% to 2%. If you put two and two together, could you conclude that XDR would be higher than that?

That doesn't necessarily mean it's 3.5%. I guess.

yeah. You could come to your own conclusion there. I guess.

Fair enough. And John, I appreciate Jeff's feeling left out -

That's OK.

John, I do appreciate all of the detail you went through. I do -- and I -- you know, you guys have the legal brains to figure out what's right to do. I guess the question is there is a hint of disappointment of not perhaps getting all of the claims that you felt, and perhaps the judge applied some technicality and again I know you want to be respectful of the judge. Is there room for you -- have you done taken the right steps to perhaps appeal this if somehow there is another miscarriage of justice here?

I don't want to adopt that characterization. We pay close attention to every step of the case. We have paid close attention to this step and we think we have preserved our rights appropriately and we are looking forward to getting to trial.

OK. Good luck with that. Thank you, guys.

Thank you, Eric.

Your next question comes from Michael Cohen of Pacific American Securities.

Hi, guys. Congratulations on the quarter.

Thanks, Michael.

Thanks, Mike.

I have a question for each of you. I guess starting with Geoff, if I understand your prepared remarks right; you said you looked forward to increased licensing and settlement opportunities in 2004? If I understood that correctly, are settlement talks underway?

I think I said I was hopeful, and -- hopeful and we don't have a crystal ball.

Are settlement -

That's as much as we can so.

so, you could not comment on whether settlement talks are current or not?

Right

OK. Bob, the question that I have for you is it seems to me that DDR-2, would likely use more intellectual property from Rambus than DDR. Would there be a differential licensing rate to existing licensees of DDR? Or DDR-2?

Yes. I think I'll let John field that question.

Without getting into discussions we have had with licensees, it's a question which is kind of a moment right now, and we haven't decided yet what our approach will be, but there's the premise of your question, we think, is correct. There is in DDR 2 all of the IP that's used in DDR and then some that's covered by our patents.

Now, with the existing licensees, wouldn't that have had to be stipulated in the original contracts? As opposed to the in my opinion my chrom and hinix who opposed it

The easy answer is actually I believe you can see the existing contracts. I think they're posted with the sec, and I'm not giving anything away by telling you that they cover S DRAM and DDR only.

I got it. OK. And thank you very much for that. And the other question I have is it seems with a possible plea agreement coming out of Mike Ron that -- and the material that you already have listed on the SEC. docket from about last January that you are getting enough evidence here to go forward with a price fixing claim. And you have announced that possibility on a previous conference call. And I was wondering, John, if could you give us a little bit of the decision making criteria that, you know, would influence your timing of when to go forward with something like that?

I appreciate the question. I think that you are right, if you want to go look at the FTC filings in the September 9 time frame. You will see that we have addressed this. I think it's fair to say that it's kind of where we want to address this at this point. We don't want to kind of open the KIMONO any further in terms of what the deliberative process is on this point?

meaning that you would, if possible, avoid a new suit unless you are forced and backed into that corner?

No, be what I just said was I don't want to share with you my thinking about this, beyond what I already have.

Got it. OK. Well, thank you very much, guys. Congratulations again.

Thank you. Bye-bye.

Thanks, Mike.

[OPERATOR INSTRUCTIONS].

OK. It looks like that's the end of the questions. I'd like to again thank everybody for attending today. We really appreciate the questions and support and good luck this year.