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The Capstone Webcast: Corporate Focus and Credibility IssuesI listened yesterday to the Capstone investor conference webcast from earlier this week. In my view, that Capstone webcast illustrates ongoing problems of candor, integrity (in the sense of living one’s truth) and (perhaps) corporate focus – all of which seem (in my view) to contribute to other problems, including that, industry-wide and in the financial markets, Rambus is apparently not generally held in high esteem. My rough estimate is that about 80% of the airtime in this Capstone talk – including almost all of the first 18 minutes (out of 29 minutes total, including questions) -- was basic Rambus company history, followed by basic memory market information, followed by descriptions of new or future Rambus technologies and vague hopes about future technology revenues. The portion of the talk devoted to Rambus litigation events was remarkably short and seemed (oddly) to stress future patent cases. Rambus gave less than two minutes of attention (by my count) to the Rambus antitrust trial – a game-changing case that has already officially started in San Francisco, is only sixty days from jury selection, and in which Rambus seeks damages (after mandatory trebling) equal to about seven times Rambus’ current market capitalization. Let’s put aside Rambus’ technical glitches and presentational issues at Capstone (although they merit attention). My question is simple: Doesn’t this allocation of time by management when talking to Wall Street sound an intrinsically false note: i.e., a failure to recognize (or be forthright about) what really matters? To be sure, one can imagine that future technologies and hopes regarding future revenues are areas where the Rambus spokesperson and others in management may feel they have had a significant personal contribution to make and role to play (at least compared to litigation). But that ought not to govern corporate communications at an event like Capstone. Prospects for Rambus licensing revenues and litigation recoveries or settlements are what matter now. These relate to existing (not future) Rambus technologies. They include prospects for being paid for industry-wide, past and ongoing usage of those existing technologies. Those revenue prospects (closely tied to litigation progress) potentially reach into the billions of dollars. They dwarf current revenues, and, indeed, dwarf all aggregate Rambus revenues in the history of the company. New and future technologies as described by Rambus at Capstone seem largely (and for good reason) irrelevant at this point to the Capstone audience. They fill up the time and sound good (terrific from a technical perspective, as far as I can tell) but will have (I am, confident) little impact on institutional investors’ buying decisions at this time. In any event, Rambus gave us no hoped-for timeline for revenue from its new and future technologies. And hopes for the friendly licensing of new Rambus technologies have, frankly, little apparent foundation at this time given Rambus’ performance for (at least) the past several years. Witness the Intel MOU, which was announced by Rambus with great fanfare and appears to have yielded nothing. Consider three relatively simple sets of points that might have been succinctly made by Rambus at the Capstone investor conference: 1.
The 2. The defendants in the case have already admitted massive price fixing conspiracies very closely aligned with (and/or actually overlapping with) the boycott and price fixing conspiracy Rambus will prove. 3. Already public internal DRAM company emails link these admissions to Rambus’ injuries, which injuries the Rambus expert has put in excess of $4 billion, and which are – as a matter of law -- to be the joint and several responsibility of each defendant (no matter its market share) and are – also as a matter of law – to be automatically trebled if found by the jury. I submit that the brief time required for Rambus to have made these points to a group of potential new institutional investors would have been well worth it. Certainly these points are, for example, more important to current and future investors than revisiting (as Rambus did at Capstone) the 2002-2008 FTC proceedings. One final point, which also goes to corporate credibility. Perhaps Rambus meant to discuss the end of the FTC case as a way to signal the imminent resumption of Rambus licensing activity. That signal would be great news. But is it useful to now charge the FTC with “bringing most of our licensing activity to a halt?” Such an assertion raises a number of questions (and perhaps eyebrows.) The FTC remedy was reversed over fifteen months ago and there has been no apparently meaningful licensing activity in the meantime -- at least in terms of announced results. And, of course, there is another problem with this assertion. The FTC remedy, even when in force, only limited Rambus rates for certain licensing. It did not bar that licensing and it put no limits at all on the licensing of RDRAM, XDR, XDR2, DDR2, DDR3 or later memory or controller designs. I am out of pocket for much of the coming month but eagerly
await the motions in limne,
spoliation and other pre-trial issues to be decided in the Best wishes, John Danforth (Written solely on my own behalf)
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