Rambus' CEO Presents at JPMorgan Global Technology, Media and Telecom Conference (Transcript)

| About: Rambus, Inc. (RMBS)

Rambus, Inc. (NASDAQ:RMBS)

JPMorgan Global Technology, Media and Telecom Conference

May 16, 2013 10:40 AM ET

Executives

Ronald Black - CEO

Satish Rishi - CFO

Analysts

Paul Coster - JPMorgan

Paul Coster

Good morning everyone, my name is Paul Coster covering applied emerging technologies here at JPMorgan, and one of the stocks we cover is [overrated] [ph] Rambus. And I am delighted this morning to welcome Dr. Ronald Black, CEO of Rambus, and Satish Rishi, CFO. Welcome gentlemen, thanks for making the trip from California.

Ronald Black

No problem, we were here anyhow.

Paul Coster

All right, so Ron perhaps as well, you have been in this position now for over a year. It feels so recent.

Ronald Black

It feels much longer than a year but it's coming up on a year, end of June.

Question-and-Answer Session

Paul Coster

Well you have had a tremendous success so far and we hope for more to come. Perhaps you could tell us what the company does?

Ronald Black

Sure so the company has a long history of being in the tech space with largely a focus on memory interfaces and IO. And that has been from the early days in 1990's where they focused on a set of technologies ultimately referred to as double data rate so having higher performance, lower power, memory interfaces. In 2009, the company began an expansion path where it focused not just on the memory and interfaces but through acquisitions into other spaces.

The first was LED lighting, not in the semiconductor side of it but more in the optical waveguide portion of it. That was followed by an acquisition of Cryptography Research Incorporated, which we call CRI. And CRI focuses as the name says, on cryptography, so in the security space. From there we acquired a small company called Unity that did non‐volatile memory so more back into the semi-conductor space but the non-volatiles.

And we also had smaller acquisitions that we didn’t announce in the software side. When I joined, the company had gone through a tough spot and the Board had wanted to explore alternate strategies. So we stuck with the core of the company, it’s really technology. But we concluded that we really wanted to find a path to move a little bit away from the assertion-based litigation, more back to the company's roots as a technology partner and developing technology for the customers and that's really the transformation we begun.

And I think as you noted Paul, the market starting to see some of the positive aspects of that, some of the improvements in relationships, just in the spirit of openness, it doesn’t mean that we won't litigate, we have to sometimes. But I think our preference both as an engineer myself, we want to see our designs and collaborate with customers but also because on a ruthless financial standpoint if you look at companies that do the technology licensing well, right, particularly well would be ARM; but also companies like imagination space, a lot of companies in the IP area, they get and deserve higher multiples where the customers have very sticky relationships. And that's really where we are trying to move the company.

Paul Coster

All right 90 odd percent of the business amount is from semi conductor business group and about 10% from new business. We are going to come to new business shortly, where I think some very interesting things are happening, not so they aren't in semi. Can you talk about - what constitutes that I think in fiscal year '12 it was about 250 million. What makes that up, who are your customers, what kind of contracts or what kind of terms were associated with those contracts?

Ronald Black

So, within that portion of the business, let's say roughly 80% is really focused on patent licenses. And in patent licensing, we have licensed on the DRAM side Elpida and Samsung. We have not licensed Hynix and Micron and we are proactively working on that.

I am sure we are going to come to the Hynix ruling subsequently, so I won’t expand upon it. The rest of the business is on the controller side, so licensees like NVIDIA, Broadcom, AMD and the like. So that's that part. On the technology licensing side, we have partnered with companies like Sony and IBM to license designs, design knowhow and actually transfer that and that represents the other 20%.

That wasn’t a focus for a long time in the company as it became more assertion-based but we have been focusing a lot more on that recently. We announced, I guess it was in January or Globalfoundries announced in January at their big customer conference that they're working with us to provide all of the high speed interface and IO technologies and some of their advanced 14 nanometer FinFET Technology. And I found that a very compelling introduction because people like Globalfoundries have a multitude of people to go to work with them on IP. And I think selecting us showed that we really had and we are demonstrating very high performance.

We partnered with them a lot as a foundry partner but never under this design space. So, we were very proud to be up on stage with likes of ARM doing partnership programs with them. And I look forward to expanding that in to all of the customer base.

Paul Coster

So, the patent licensing terms are what and then what is rollover risk? And then on the product side what exactly is the revenue model there and what kind of term is that governed by?

Ronald Black

So, I’ll give a cursory one and Satish maybe you could also pickup on it because Satish has been with the company for six years and has a lot more detail. In most of the cases, we engaged in a patent license with the customer and the rates are either a fixed payment or a variable payment based on their revenue. They systematically come up every usually five years. We are being more flexible now. We’ve gone for shorter or longer terms as the customers would look to engage us with.

In terms of the fixed payments you can imagine a customer who is very confident that they’re going to grow would prefer a fixed one then those who have a more volatile industry would perhaps want to go up and down with it.

So we engage with both of them. In the big customer, obviously Samsung, Samsung pays us between $80 million and $100 million a year depending on the revenue. It’s just revenue-based. So, things that help the revenues so higher prices are good for us, it’s also good because they have more obviously profit to share with companies like us. It’s same on the controller side, some of them are revenue-based as a percentage of ASP, others are a fixed payment. Is there anything else?

Satish Rishi

And on the technology license side, you asked a question about what the term is typically for those (inaudible) a life of their products, their customers are selling. So, for example we started working with Sony on PS3 sometime in 2002, 2003 timeframe by the time the first PS3 shipped in October 2006. So, we were continuing getting payments on royalties for PS3 as long as Sony keeps shipping PS3s. So those are really useful for us because of the long - there’s initial investment upfront but is a long tail to the revenue and bulk of the cash we collect goes to the bottom line. So, very high margin from that perspective.

Paul Coster

Let’s take Samsung as an example, right. I mean when does that contract expire and what – the products are going to be around for a long time yet. But how do you look to roll that contract over, what is the negotiating leverage that Rambus has?

Satish Rishi

The contract expires at the end of 2014. So, I think as of 1/1/2015 we have a new contract. So, our business is really to rollover these contracts for longer periods of time. I want to remind you that companies like AMD they are in the second rollover. Elpida I think is in the third or fourth rollover, Samsung technically in the second rollover. So many of these customers they do roll over their contracts and we continue to develop a strong patent position. And even though with the fundamental patent that the company was funded on, the Farmwald & Horowitz patent, they expired in 2010, Samsung, Elpida, AMD, Broadcom, NVIDIA, a lot of these companies they re-up for a five-year or they enter a new agreement for a five years because we have additional patents that the industry standards read on and that’s part of the reason why we believe that we have a good, a good position to go and have a discussion. And I think discussion probably should start sometime late this year or early next year time frame.

Paul Coster

There is no sudden patent cliff here. Is there?

Satish Rishi

No.

Paul Coster

You’re [filing] [ph] new patents, if anything there is even more patents (inaudible).

Satish Rishi

Absolutely, plenty, I mean we still have close to 1300 patents on the memory side, they are outstanding.

Paul Coster

One of the licensees is Elpida and of course Elpida - it has been going on for so long now I don’t know what the status is anymore. But they are in they are in the process, overall they have been acquired by Micron who is a non-licensee. What does that mean? Is Elpida going to honor the prior license? Is Micron suddenly subject to the new license? Tell us what’s going on there?

Ronald Black

So, I think there is a couple of pieces on that and there is also the industry at large we probably have to tie it in as well. So Elpida is a very good customer licensee, we have a very close relationship with them. They have particularly attractive mobile technology. And we have engaged with them for a long time and are looking at expanding that in a variety of different ways more on the technology licensing side.

So I think that relationship builds very, very well for us. They are going to be as far as we know from what we saw in the documentation and I guess there was an announcement yesterday that the bond holders who were fighting it seem to have been put to rest. So, it’s seem like it’s going to go through whether it’s June or July or August whenever.

So, Elpida of course can remain licensed to us if it’s held as a separate entity, of course it can remain licensed to us. I'm cautiously optimistic that we will be able to extend that to Micron, I think the combination of the Hynix ruling which if you read some of the headlines, sometimes it’s not clear but this a very favorable ruling for us because Judge White said, yes we were sanctioned for the spoliation in 1998 or 1999 but the patents are valid, the fact that they were infringed is clear.

He had a rate that he was describing, it’s a very complicated calculation and in fact we’re not really talking about it because we’re filing briefs with the court on our interpretation of that, it’s due in 10 days so it’s probably on Monday or Tuesday that we file it. I’m not sure when that will be public but it takes into account all of this, and I think it’s a very workable rate. This helps us because putting that behind us which ultimately will - I think it makes lot of sense with Micron.

I have a good relationship with Mark Durcan, he is a really good guy, engineer like myself. And I think we want to do something together, right, we haven’t yet. Obviously, but I think the confluence of Elpida that transaction which is going to significantly help Micron especially in the mobile space, our good relationship there and the Hynix ruling is setting us up for putting this all behind us.

Paul Coster

So let me just build upon that a little bit. I do sense that you have changed the sort of philosophy of the company a little bit towards more partnering and away from the adversarial stuff. You are a new face in the dialogue of course and now you've got Elpida being absorbed by Micron. So it sounds like you feel like it's been a bit of a reset take place there. But this is a multi-threaded thing right, it’s not - there are still threats as well as hand of friendship being extended, right.

Ronald Black

Yes and that’s why we are very cautious when we describe it. It’s not that we won’t litigate, it's just that our preference is not, and part of it you could say is altruistic or social in a sense that we're mostly engineers and engineers desperately want to see their products brought to market and they would rather get paid and collaborate with customers than deal with the legal side of it.

On the other hand, we have a fiduciary responsibility to defend our stuff and monetize it. So we have been very positive on Acacia and we chose, and looking at our patent portfolio on the LED side as an example, that we had a very rich patent portfolio associated with displays. Everything from televisions to iPads to phones, and there is a very broad infringement on this. It wasn’t an area that we were spending a lot of time monetizing, but we concluded that we should take that to market, we necessarily don’t want to do it.

But Acacia is a very good company, has a lot of focus on being able to monetize those. So we entered in an agreement to transfer some of our patents, it’s not all of our LED patents, but those that are in the space of displays and then subsequently automotive. We also had a small portfolio there that they decided would suit them as well. And so we're going to find a way to deliver value to our shareholders even if it's not something that we are going after. So, we will be aggressive when needed to, but it’s our preference not.

Paul Coster

I had a fascinating conversation with the Interim CEO at Tessera earlier this week in which he talked of the different types of business they have got, they have got this kind of annuity business which I know you have and they also have episodic settlements and one-time payments. And so they have a different capital allocation possibly for the two revenue streams.

Now one business they reward the investor immediately with so when they get a capricious settlement, the cash is immediately or some of subset of it is immediately returned to the investor base and the rest of it is forwarded into the R&D core business. Is that an appealing kind of philosophy, is that actually where you are headed as well, I mean you've got some potential settlements coming up.

Ronald Black

It’s a possibility; I tend to not follow these algorithmic practices that may be Rick was talking about; I like the concept of just driving shareholder value. In terms of preference, normally if you are having growth in the industry you want to invest in it; in our particular case we have a very highly leveraged model in the sense that we don’t have to add lots of expense. The designs we do is what I refer to often as we don’t do VLSI design for food. So this is not for every new customer we have to add a new engineer, 10 engineers, it’s really built on a design that we developed and we resell. So we think that we can grow the business with having very limited incremental expense. When we have one-time benefits, I don’t see us going through acquisitions.

At this point, I tend to be more frugal maybe it’s my Scottish heritage as opposed to the company. And therefore you would say, probably dividends or stock buybacks would be something that we would consider. We talk about it often, the management team and the Board but we are not prepared to really say where that would go but, it would seem a very logical way to reward the shareholders that want to be with us.

Paul Coster

Okay, I want to go to new business group in a second but before we do that I’ve just got one question here from the web which I think has to be asked, even though it’s for me and I am sure for you, kind of somewhat tedious subject these days. At what stage will sanction be deducted from judgment against Hynix, will interest be calculated before or after the credit for the sanction and what support is there for this in wording of Judge White's order or in case law.

Ronald Black

I'll let Satish answer that one. (Multiple speakers)

Paul Coster

But I think the answer is what’s going on with Hynix and what’s up next please?

Satish Rishi

Like Ron mentioned, it is a positive ruling for us, whichever way we look at it, it’s positive.

Paul Coster

Well, the sanction wasn’t.

Satish Rishi

I’m going to say except for the sanction, one of the sanctioned portion of it, but we have been waiting for the ruling to come out, he had the option to relook at the patents but he did not change anything on the patents on the infringements so this was – his whole ruling was all about sanctions. He didn’t set any terms on damages all he said he was going to deduct 250 from the previous damages and the question is what are the previous damages.

The 349 million number is one but then there is interest, there is also the compulsory license from 2009 to 2010, there is additional interest on it, so there are a lot of different portions of it so, right now we're working in trying to analyze what we should present, because what we have to do in the next ten days from the day of the ruling is be able to be propose our form of judgment and to tell the judge this is what we believe we read and then of course Hynix will provide theirs. And then we'll wait for the judge to come with the final judgment, so, I would ask people to be patient when our proposal or brief becomes public, they'll see the position we've taken which obviously will be the most shareholder friendly and the friendliest to Rambus.

Paul Coster

I mean they’ll put in accounts (inaudible) and then it'll be they don’t get, just go on again (inaudible) for another year.

Satish Rishi

There's a potential for it but you know I think one way to look at it is, it's not too low a number, it's not too high a number, but it probably does open up a door for sitting across the table and talking about settlement versus, as a business settlement versus a court settlement. And entering into some sort of partnership going forward for the next five years and being collaborative and put all this behind us.

Paul Coster

And Ron your view is that it also provides a little bit of impetus towards this arranging a business, a favorable relationship with Micron as well.

Ronald Black

Yes, I definitely think so, I think it's in part the ruling, it's in part our style. You know a lot of businesses are built and trust and value. Every time I see our technology I see lots of value in the eyes of customers, Globalfoundries is one. But you're going to talk about NBG; we also have a very important technology on the cryptography side that's going to be I would say more important in the future in things like mobile devices.

Paul Coster

Well, let's talk about NBG now, so CRI first of all, Cryptography Research I think you acquired it nearly two-three years ago now.

Ronald Black

Two.

Paul Coster

So I think an important thing happened in the last nine months which was getting the CRI technology actually etched on the silicon right. So it’s now, it's basically just a logic switch that needs to be triggered in order to activate which makes it go to market a lot easier, can you talk about what happening?

Ronald Black

Yes, sure, that’s in one particular segment, there's also many other segments so the technology comes in two parts, on the patent side they have I would say all of the patents on differential power analysis countermeasures, so that's ways to secure the chips from leaking information just by switching. And if you're interested later I can explain it in more detail. What we've done is besides that and in the spirit of collaboration, we're not just showing people how to do it more in a consultative way but we're saying here is a cryptographic core that can allow you to manage keys with the DPA countermeasures built in. And that's what companies like Marvell have announced that they're using. And so we have a very strong utilization of that in both content security, so conditional access and also in anti-counterfeiting.

So on the anti-counterfeiting side we haven't announced the customer, but it's a printer company, they have a business model a little bit like the razor and razor blades where the printers themselves are rather inexpensive and they make the money on the ink, as a consequence because ink is very expensive there is a lot of counterfeiting. So our cryptographic core goes in a very inexpensive form factor on the disposable ink cartridges and it's authenticated through our core, similar type core in the SOC on the printer. So that type of combination is very interesting to us and there's many areas. So everything from airline parts to networking equipment is counterfeited and so people want to authenticate that you have the real one there as opposed to a knock off.

Paul Coster

I'd like the real one on an airplane, please.

Ronald Black

I tend to as well.

Paul Coster

So then talk to us about the other side of this CRI business.

Ronald Black

And this is the area I think that you're describing. So, in the spirit of driving value for our customers and their customers in the content protection side conditional access so set-top boxes, which can ultimately also be done in TV, so it can be integrated in every way, whichever way you want it. On the decode chips, there is these type of secure cores and we've licensed the cores at essentially very low rates, to the companies like Broadcom, and others as we go through, and what you're describing is they have now introduced their chips those chips are being put in set-top boxes and those are in the market place.

So we get a little bit of money through those transactions but their customers, who are really the ones that get the value from the silicon because they're the ones who have the service, where they are stuck to servicing the problem they have an option to turn it on with us, either immediately as it goes into the field or later on, of course the price later on is higher it’s kind of an insurance scheme, everybody wants just in time insurance right before the car crashes I want the insurance to be paid but not before that.

But that's not how it works. So as we've gone, what is it Satish, 75%, of the chipsets that are going out now in the set-top box have our technology in them. So we should be seeing monetization especially starting later this year and even more next year and the year after that.

Paul Coster

I think you've talked about it being a $40 million plus opportunity for the company, that alone right.

Satish Rishi

I don’t think I've thrown those numbers.

Ronald Black

I think you threw it out.

Paul Coster

May be - the unit volumes sometimes ASP, what is the ASP there, if you can show that.

Satish Rishi

Well, we get paid on a per unit basis irrespective of the ASP, so I think it’s in per chip basis that we have.

Paul Coster

I am sorry, so how much do you get paid approximately?

Satish Rishi

We haven’t disclosed that because our customers don’t want to talk about it.

Paul Coster

And this is when we talk about set-top boxes, this is broadly defined. It’s not just a set-top box, it’s a, it could be an X-box or PS2 or a mobile phone even, that incorporates…?

Satish Rishi

Mainly the chipsets for connected TVs and set-top boxes, is what we focus on.

Ronald Black

Without being too visionary, the way we look at this business because the security TAM is huge, right. There is billions of dollars, it goes in everything from pins to firewalls to other DRM type technologies. The hardware based security capability that we have on DPA and secure cores, so a secure route of trust.

We think that over time every device that’s connected to the Internet is going to, not only want, but have to have that. So the question, when you look at the TAM is how many cents per device do you think we could justify in our technology or other people that would be competing with us, time, everything that goes out.

Every printer, every cell phone, every TV, anything that’s connected, every Internet of things, the Nike plus bracelet that I wear. So everything like that should have some level of security. Even connected lighting, you certainly don’t want the 12-year-old next door hacking into the connected lighting space and turning off and on the lights at your house. So we think that this is an enormous market.

Paul Coster

All right, tell us a little bit about the revenue ramp for CRI.

Ronald Black

What have you disclosed so I don’t have a Reg-FD problem?

Satish Rishi

No, I think, only thing we’ve said is that, it’s about 15% of our total revenue in last quarter. I think last year we had wanted it to be about 15% of our total revenue but we ended up closer to 10% or 11% as we ended the year. So we were little disappointed with the overall execution, but this year it’s about 15%. That’s what we have so far. And but you know, definitely the expectations, it should be ramping later in the year and next year.

Paul Coster

And you know that because you know the product cycles of your customers.

Satish Rishi

Yes.

Paul Coster

Does it have the same - it needs commitment from the device guys, it also needs commitment from the media.

Satish Rishi

The conditional access guys.

Paul Coster

And also from the content providers, have you, do you have a good visibility into that. Can you cite an example?

Ronald Black

There is one and we announced that, or they announced that the Secure Storage Content Association, which is collaboration of the content guys and the likes of Western Digital, so the media storage guys have been teaming together to define the next generation, either secure storage or streaming decode. And they have asked our CRI team to really help them author that. So we have a very close relationship with studios, with box makers, with the technology providers in terms of SoCs.

So we are really working the entire value chain, in both a consultative way, but also a business way. So we want to develop business for ourselves. So I think we have pretty good visibility. So like I described if you want to look at re-runs of I love Lucy on YouTube, you don’t need security. But when you have the latest release of a 4K movie, you are really not going to want it being hacked and distributed before its time. So I think, all of the trends are supporting, right, [brought it] [ph] option of this class of technology and these are a premier group of guys that are really driving it.

Paul Coster

Now, let’s turn to LED, so we recently attended the Philadelphia International Light Fair, and there is no ambiguity in my mind anyway that the whole world is going Solid-State Lighting very quickly and how you route the light from the LED to your intended target is an interesting challenge, there’s all kinds of sort of aspects to this. What is it that you do? What is that you have done and you acquired with recently that positions you for this opportunity?

Ronald Black

There is a couple of different things. But like all of our businesses, we have kind of the secret sauce that we think is particularly valuable to the customers. In this case, there’s really two inventions which have probably 60 patents around them in different forms and formats excluding the ones that we transferred to Acacia. And these come in coupling LEDs to an optical wave guide in an efficient manner so that you don’t lose the light. So it’s efficiently transported into the wave guide.

The second part is what we call micro lens. So typically what happens is as the LED light which is very intense is distributed through the wave guide itself, they, you etch the surface or ablate the surface in some way, almost sandblast it, and the light scatters out but in a random way. It needs a surface that’s different, and that scattering diffuses the light. It’s a good way to do it. But our invention is to put little tiny mirrors, if you will, through the injection molding process into the surface so we don’t scatter it randomly; we scatter it where we want. And this is what the companies like GE and Cooper have licensed from us. These combinations of two secret sauce and that’s what we are proactively working with them on.

Paul Coster

We went to the Cooper booth and the line to the secret display was just too long for us. So we just (inaudible)

Ronald Black

I know the CEO. So we got it. We cut the line.

Paul Coster

Tell me what it is that we didn’t see in that booth; in that little kind of cinema thing they set up?

Ronald Black

I don’t know if I can or not. So it was a very nice booth, it was a very focused booth, but it was similar to what they had last year but the storyline was very, very different. Last year it was more about imagine what you could do with this class of technology. And this year is, the technology is here and we're shipping. So right, we've received orders and we're finally in the place where we're really seeing a ramp to this technology.

So, it's not about what could it do, it's what it is doing and I see a very strong conversion like you said, everybody is switching to solid state lighting. So inside there, there was seven or eight different designs, all of them having our technology in it with them.

Paul Coster

We did see the edge lit technology at General Electric; and it’s actually one of our favorite things at the show but it's also not shipping in volume at the moment, it’s still an architectural feature of low volume and is that what we; are we still very early stage here?

Ronald Black

So Sainsbury from the U.K., you know Sainsbury. So Sainsbury has bought some of that edge lit blade type technology. And if you look on the floor there, all of those were ours. So we are working very closely with them to augment. GE, I think is unlike Cooper, Cooper is not in the bulb space but they are in the general lighting space. GE was more in the bulb space and now they are making a more aggressive move into the general lighting space. So I think they are starting to ramp as well and I suspect in the second half of this year, you’re going to see a much more aggressive path from them as well.

Paul Coster

All right which brings us to the bulb; you did actually bring out a bulb recently as well at a Consumer Electronics Show which had some clever heat sync technology in it, which was exploiting, I think the light guide technology. But in the meantime, there is a question here from the web but I’ll rephrase if I may in the meantime Cree has come out with a sub $10 bulb and I don’t know where your collaboration is positioned; can you just talk to us about your consumer initiative and what it was all about? Does it matter or is it just like a proof of concept?

Ronald Black

No, I think it matters and what we announced is two things; we announced a channel partner, a lighting company, a Canadian based lighting company that has very close relationships on a variety of products with a big, I don’t know what the American name is, the DIY stores like that, that you have out and we received our first orders for those bulbs.

Paul Coster

What were the bulbs? How are they priced? Who is the partner?

Ronald Black

We haven't announced - the partner is The Elite Group. They have a lighting under it called L’Image. It’s a Montreal based company, so it’s a French pronunciation. And they're working very proactively with us on a series of different lighting fixtures and bulb class products. So, that's how we're taking it to market. We also have an increasingly focused sales channel on the professional side, not just the consumer side.

And this is a very real product for us and it's kind of different when you think about our company obviously, but when we did the analysis we said look, there is a market discontinuity in here and that discontinuity involves a couple of things. One of them is managing the light distribution and I said, well, geez we are really good at that. And then when we looked at some of the LED light bulbs, for instance in dimmers, most of them didn’t work. And guess what, we are a semi-conductor company that really understands electronics and we can make the best power management system. And then we’re pretty good at mechanical engineering and thermal engineering.

And the way that our opticals work is we don’t need to have a cover because we're not just pushing the light out on the top of a snow cone. So it doesn’t have to be covered we can provide holes and those holes allow convection. So you don’t just have conduction, you have convection.

So ours I think I saw a giant and under a typical, I can't remember which competitor is; 15 degree Celsius less in temperature which translates into more robust. And even though the bulbs are expensive and they are supposed to last for many years, the one's that I have, some of them blow out in nine months.

So it's not the LED's necessarily but a lot of the electronics because of the heat. So, when you put all that together and you see the market discontinuity, sometimes that's an opportunity for new players like us. How we ultimately monetize this? We don’t do manufacturing, so Light On is a partner, so a Chinese based partner to do the manufacturing. They are very, very good, it’s low priced, we have a partner for the sales channel, we have other sales channels. So we are exploring two different options, one is more of a, we are actually selling bulbs themselves or the other, more like our traditional business we take royalties on other people selling bulbs.

Paul Coster

I have monopolized this a bit but Satish can you talk about; looks like you may want to add something anyway, but can you do that let us know when this is going to be material?

Ronald Black

So an important milestone which we you’ll see in about two weeks when the formal paper gets done, but we achieved provisional Energy Star which is it’s a combination of quality so you have to have a lot of tests and the light distribution which our technology does particularly well. So that will go up on their website when you fill up the final paper; because it takes about two weeks or so. And so we think that it's obviously ramping now, it will be more material in the second half and obviously that's back end loaded because it’s a normal manufacturing process. Even if we're not doing it, our partners do. So, fourth quarter should be good for us.

Paul Coster

And when will this be material do you think Satish, the lighting subset of your NBG.

Satish Rishi

I think we’ll probably start breaking out maybe sometime in early next year.

Paul Coster

That would be great. Are there any - I’m sorry, I kind of monopolized this. Are there any other questions in the audience?

No. Then my last question is you also strangely, you’re able to produce other things as well which seems unrelated to your core competence including digital media, cloud hosted digital media platform, what’s that all about Ron, and any progress in monetizing that?

Ronald Black

So the company has through this analysis and trying to broaden its base, acquired small bits and pieces of things and also has a lot of core competence inside. So, it evolved over time to this multimedia platform which as I told the guy who runs it, if I wasn’t CEO of Rambus, I would want to take this outside and find a way to monetize it because it’s a really, really cool platform that connects TVs and with second screen, but we come from the second screen being the first.

So, that’s something that’s very non-traditional for Rambus. So we’re really exploring very proactively different models and including a pure divestiture or an exclusive license, for the obvious reasons that you could imagine some partners may look at it and say well look, I don’t want to license something and then you take to my competitor and relicense the same technology. I want to build on it and differentiate.

So this is something that is really more set for a divestiture type process, which I think we’ve kind of openly discussed as a possible outcome of it.

Paul Coster

Thank you very much.

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