2009: Rambus' Year to Shine

A watched pot never boils. So goes the cliché. But, we all know that it’s not true. It just seems like it will never boil. If enough heat is applied, the teapot will whistle.

Another cliché goes like this: never invest in a litigation stock. While this can be valuable advice, there are exceptions. Certainly the Qualcomm (QCOM) price explosion in December of 1998 was a classic example. Ericsson (ERIC) was convinced by the courts that CDMA was the way of the future, and that it must be licensed. QCOM stock price went from $3.23 on Dec. 31, 1998 to peak at $100 within a year, but of course that was during the bubble years.

However, Rambus has one thing going for it that Qualcomm didn't. Rambus technology has already been adopted by every DRAM manufacturer and is in virtually every electronic gadget sold around the world today, from cell phones to HDTVs.

There are many students of the Rambus story who feel that Rambus Inc. is poised to follow a path similar to QCOM's epic ascent. The bubbles have risen lately in the tea kettle and 2009 appears to be the year that Rambus stock price will take off. Kevin Landis, analyst for First Hand Tech, Leader’s Fund, played an important role in QCOM’s stock reaching the tipping point. At the beginning of this year, he picked Rambus as the number one stock of 2009.

In March of the year 2001, Rambus stock thundered to a high of over $480 per share (split adjusted $120). It did so because of its phenomenal patented discoveries which unblocked the bottleneck between memory and the CPU. Rambus inventions transformed the interface forever allowing voluminous transfers of data many times those of the past. Now, some 8 years later, Rambus stock sits at below 10 dollars a share! What happened?

As those familiar with the facts of the case know, the Memory Makers (Hynix, Samsung, Micron, Infinion, and others) conspired to “kill” Rambus and take its valuable discoveries, incorporating them in their standardized DRAM. Technology titan Intel had discovered the value of Rambus proprietary DRAM (RDRAM) early on. It adopted RDRAM for its Pentium processors because it was the best DRAM in the world at the time.

The Memory Makers (MMs) freaked out at the thought that Intel and Rambus would combine to make them mere DRAM foundries. Thus, they illegally conspired to ruin Rambus. They proposed a three pronged attack: 1. coordinate law suits to litigate Rambus to death, 2. smear Rambus with a paid media campaign which would undermine the company’s credibility and spread mendacious claims about them, and 3. Hynix and Micron would use their considerable political clout to get the FTC to charge Rambus with fraud and deception at a Standard Setting Organization. This highly organized and funded conspiracy was very effective. It has taken Rambus a decade to disprove the trumped up charges in the press and at the FTC. Earlier this month, the Supreme Court finally slammed down the lid on the FTC charade.

But, something strange came out of that FTC witch hunt. Rambus managed to get their hands on some documents which implicated the MMs in an antitrust conspiracy. Rambus was compelled by the volumes of incriminating records to file an Antitrust Case (AT case) against the MMs. On 05/05/2004, Rambus filed an antitrust suit against Hynix, Micron, Samsung, and Siemans at the Superior Court of the State of California. "We can't ignore the strength of this evidence," said Rambus formerr general counsel John Danforth. "We have a fiduciary obligation to our shareholders to do something about this." This case will finally come before the court on September 28th, 2009. Currently, numerous summary judgments are being ruled on in this case, with Rambus having won every summary judgment thus far. The last three summary judgments are scheduled to be heard on March 16th in San Francisco Superior Court.

There are several streams of bubbles rising through the hot water (I can think of at least five others at present) that I may write of in the future, but it is the AT case that will most probably blow the lid off this stock.You see, the Rambus share price of $480 in 2001 was the beginning estimate of the earnings Rambus would achieve in the coming years. Most of that promise will be included in the damages of the AT trial. It is currently estimated at 4.3 billion dollars, subject to automatic trebling in this instance. Rambus stands to win over 13 billion dollars.

Will Rambus prevail in this trial scheduled for September in the court of Judge Kramer in Northern California? Those knowledgeable predict that the MMs will never go to trial, that they will be forced to settle before trial. The incriminating documents that Rambus possesses are lethal. For instance,Willi Meyer of Infineon (then part of Siemens) in 3/1994, said the following:

"Rambus is not a memory, it is a memory system that includes, controller, bus, interface, protocol and memory. One day all computers will (have to) be built like this, hopefully without royalties going to Rambus."

In addition to hundreds of such damning remarks, the MMs already have confessed to conspiracy to fix prices in the DRAM industry (including RDRAM) before the DOJ. The MMs cannot afford to let the details of their collusion into the public domain. Otherwise they could be facing a long train of class action suits from shareholders and others for their misdeeds.

Should you doubt the veracity of this article I suggest a visit to Rambus.Org where you can read the facts for yourself.

As for me, I’ve placed my tea bag in my mug. I’m planning a nice cup of tea.

Disclosure: I am long Rambus stock.

Comments

[User 370748:]

Whoa! 13 Billion?!?! Isn't that about $130 per share by itself?

Mar 16 07:22 PM

[Marcap:]

$124.58 by my calculation based on 104.35M shares o/s.

Not bad from a $9.26 investment. :)

On Mar 16 07:22 PM User 370748 wrote:

> Whoa! 13 Billion?!?! Isn't that about $130 per share by itself?

Mar 16 07:51 PM

[jabberwock:]

That's an interesting story you offer. Too bad it's not based in fact.


On Mar 16 01:10 PM Blee wrote:

> I notice that everyone commenting so far seem to have Rambus stock,
> humm; isn't that interesting.
>
> No one involved in this mess is without sin, and Rambus set it's
> sights on big money a long time ago. Why would they destroy documents?
> Because it would hurt them, humm.
>
> Rambus sat on the committee to set standards for the industry and
> wow, they included their own patented device structure, imagine that.
>
>
> They remind me a little of Enron and their little debacle.. Rambus
> should certainly get something out of this mess, but; it could or
> maybe should be jail time or smaller patent fees.
>
> Ultimately it is us, the consumer who will pay for this mess.
>
> Blee

Mar 16 08:42 PM

[unabletopla...:]

It is so sad that our court system is full of corruptions. Even our government agencies like the FTC or even the DOJ might be involved with corruption. There are also some Congressmen and Senators, governors involved in this whole corruption to screw Rambus.

All this will be revealed if only the FBI were to open up an investigation of this matter about corruption taking place.

Mar 16 08:47 PM

[atest457:]

Prufrock, great teaser of what's sure to be a 2009 story! I look forward to your next installment. It's refreshing to see the different perspective outside of a message board that counters the coordinated drum beats of document destruction and JEDEC deception--accusations that have now been rendered impotent in an honest court.

Unfortunately we still run across "opinion pieces," such as the one Tom Shohfi authored not too long ago, that reflect an abject ignorance of the facts and continue to promulgate half-truths and inuendo.

Thanks for bringing out what the potential of an investment in Rambus will be WHEN the justice system gets to end of the road for the cartel. Cheers.

Mar 16 08:48 PM

[nxt999nxt:]

Thanks for penning the article, Prufrock. I've followed this story for over 10 years....and everything I read in your write-up is true......although it is sad that it took so many years to simply confirm the conspiracy theories (now facts) that many identified so early on.

Through it all my patience, and my confidence in the entire US system of justice have been sorely tested.

I remain hopeful for a fair resolution to the entire matter during my lifetime.

and most of all, I can't wait to read your follow ups elaborating on the additional five streams of rising bubbles.

Mar 16 09:16 PM

[Marcap:]

So can a lot of money.

Frankly, I can't recall the last time I saw a stock trading at less than $10 per share turn into $100, or a stock with much more potential of doing so.

In any event, I believe that Rambus' position is the correct one, and that under the law the company will indeed eventually prevail. Furthermore, I hold no position in Rambus which of course might otherwise entice me to make such a claim.

On Mar 16 04:01 PM soaringpilot51 wrote:

> The truth can set you free.

Mar 16 09:23 PM

[the heroes ...:]

After all these years,glad to hear an account of what really happened! What a gift to read an article that goes deeper than the usual cliche's about Rambusand what the near term possibilities the com pany has to offer.


THJ

Mar 16 10:59 PM

[RambusWins:]

We’ve seen so many articles, we’ve watched so many interviews on TV in the matter of Rambus but nothing compares to this writer’s clarity, objectivity and knowledge of the case. It has been said: “you have to be a lawyer to understand the Rambus Saga.” Prufrock’s smooth style and simplicity made it so easy to everyone to understand the travesty that Rambus went through.

It is true; it is difficult to follow a litigation story. It requires time and the vagaries of the judicial systems have been on full display with Rambus. I want to strongly comment Prufrock on his efforts, for the time he dedicated to grasp the full story. I urge everyone to visit investorvillage.com forum, click on the user ID “Prufrock” and notice the respect the entire forum has for him.

Way to go Prufrock! And thank you!
RambusWins

Mar 17 02:29 AM

[spirit_long71:]

As so many have said before me, NICE ARTICLE. (glad I'm long).

Mar 17 02:58 AM

[gumpyf:]

Well written. After reading this, a couple of additional cliches' come to mind like,

"There are two sides to every story" and "The truth hurts".

Thanks Mr. Rock for beginning to get Rambus' story out.

the Gump

Mar 17 07:00 AM

[dean_01940:]

Amen...Will wait 6 more months for saga to unfold. Thanks

Mar 17 08:06 AM

[til48:]

This is a shocking story that should serve as a wakeup call for all of America. Powerful interests are destroying the innovative edge that has made this country great. In this case, a powerful international coalition of companies have stolen intellectual property worth billions from a small, brilliantly creative American company. In the process, Americans have been denied the best technology at the cheapest price and our US treasury has been robbed of taxes that would have been paid by Rambus had they been paid for their technology. Rambus's attempt to achieve justice has been thwarted by a planned and coordinated effort to litigate this company out of existence. Amazingly, Rambus has survived and seems to be on the verge of victory. I say this optimistically because Rambus has faced questionable rulings from some courts, judge removal in others, and 8 years of harrashment from the FTC. Hopefully, vindication is at hand. One has to wonder how many companies have not survived the theft by big monied interests who have litigated comanies out of existence. I hope this story gets the full attention of the American public it deserves. The long term interests of all Americans is at stake because the greed and powerful influence of companies who do not play by the rules threatens to undermine the integrity of all of our institutions and the economic survival of this great country.

Mar 17 08:50 AM

[Marcap:]

Indeed! Unfortunately this is yet another blazing example of how big business and government often get together to squash the little guy, and obtain rights that they would not otherwise be entitled to. If Rambus were a big drug or oil company, it would likely not have this same problem, as government and the courts would be only too eager to jump in to help stop violators of their Intellectual Property Rights. But when it comes to the little guys, sadly more often than not, their rights are ignored. And yes, it is corruption...plain and simple.

On Mar 16 08:47 PM unabletoplaytennis wrote:

> It is so sad that our court system is full of corruptions. Even our
> government agencies like the FTC or even the DOJ might be involved
> with corruption. There are also some Congressmen and Senators, governors
> involved in this whole corruption to screw Rambus.
>
> All this will be revealed if only the FBI were to open up an investigation
> of this matter about corruption taking place.

Mar 17 11:21 AM

[sab63090:]

This is a true story about corruption at the FTC and Rambus' ability to carry it to the Supreme Court.....and win!

Additionally, it's about Samsung, Micron Tech, Hynix, and Nanya colluding and stealing IP from Rambus.

$13 Billion sounds good to me!

Mar 17 01:14 PM

[ArtfulDodger:]

Prufrock:

Good article and excellent info.

But even more I like a man who sticks his toe in the water he's advocating.

It's hard for me to pay attention to touts who don't follow their own advice.

The best with your investment in Rambus, and I'm going to give it another look myself.

Mar 17 03:54 PM

[mrrum:]

great article. its sad that in the large media outlets the truth is twisted and outlets like CNBC would support the large confessed criminals of Micron, and there gang of theives. what is also sad is the rambus company cannot employ someone like prufrock in ir to offset all the negative lies that are so prevalent in main stream media. the truth will set us all free.

Mar 18 09:18 PM

[Marcap:]

It is indeed very sad. But unfortunately much of the media, like other big business, corrupt politicians and many of the courts, are quite often swayed more by money and votes, than by truth.

On Mar 18 09:18 PM mrrum wrote:

> great article. its sad that in the large media outlets the truth
> is twisted and outlets like CNBC would support the large confessed
> criminals of Micron, and there gang of theives. what is also sad
> is the rambus company cannot employ someone like prufrock in ir to
> offset all the negative lies that are so prevalent in main stream
> media. the truth will set us all free.

Mar 19 05:16 PM

[bolshaya_ka...:]

You who are OUTRAGED by the Rambus story haven't listened to the other side of the story, obviously. Two sides to every story.

How many of you know much about DRAM? Computer interfaces?

The big picture: if we let small companies deceptively gain patents on text-book-evolutionary ideas, and with such patents extract wealth from the entire computing world (including every one of you posters), the greater good is not served.

The fact that this battle is waged against the most downtrodden technology sector of all--and the most competitive--highlights the folly. Did you pay enough for your computer's memory? If Rambus had won easily, you may have paid 3 times more. If Rambus wins now, you may bankrupt the entire industry except for Samsung--if it's possible to collect from an already-almost-bankrupt industry.

Would you like to include this "happy ending" in your docudrama: thousands of Micron workers put out of jobs so that a few hundred Rambus employees and their investors can cause the price of your home PCs to rise by 20% next year.

Our legal system is a mess and inefficient on these issues--but so is our Patent Office. Rambus' patents that are pertinant to SDRAM and DDR shouldn't have ever been granted.

Find another worthy cause to invest in and make docudramas about. Rambus was hardly ethical in their early behavior, and that evil MM cartel you talk of is generating much more value to the world, and to America, than Rambus is. I hope that Rambus get some technology wins--for the sake of the current hard efforts of their Engineers--if their technology wins on the merits. But their original tactics were flawed, and dangerous to the marketplace--and that's why this battle came to pass.

Mar 26 07:05 AM

[beandog:]

JEDEC claiming Rambus secretly "fooled everyone" is a total joke. You're talking about technology Rambus has that was way ahead of its time..from changing the then 20mhz to 500mhz memory speed. Rambus' chip design was totally novel and mind-bloggling that everyone would have wondered where it came from before JEDEC adopting it. Truth is, all the committee members knew. Most just want to steal from Rambus. It was Toshiba, a customer of Rambus, who encouraged Rambus to join JEDEC. Toshiba knew Rambus had powerful patents and thought Rambus could benefit the industry.

Besides, it was standard practice that JEDEC members did not have to reveal their patents (but that those patents that get adopted would charge reasonable rates), but Rambus revealed all of theirs (pending patents) anyways.

Is Rambus the next Qualcomm? beanieville.blogspot.c...

Jun 20 02:41 AM