Rambus Q3 2007 Earnings Call Transcript

Rambus Inc. (RMBS)

Q3 2007 Earnings Call

October 31, 2007 5:00 pm ET

Executives

Harold Hughes - President & CEO

Satish Rishi - SVP & CFO

Tom Lavelle - SVP & General Counsel

Sharon Holt - SVP

Analysts

Jeff Schreiner - American Tech Research

Mike Crawford - Riley Investment Management

Michael Cohen - Pacific American Securities

Hamed Khorsand - BWS Financial

Presentation

Operator

Good day, everyone, and welcome to this Rambus Quarterly Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Satish Rishi. Please go ahead, sir.

Satish Rishi

Thank you, Operator. And welcome to the Rambus’ third quarter 2007 conference call. I'm Satish Rishi, CFO, and with me today are Harold Hughes, our President and CEO, and Tom Lavelle, Senior VP and General Counsel. We also have with us Sharon Holt, Senior VP of Sales, Licensing and Marketing, for the Q&A.

The press release for the results that will be discussed here today has been filed with the SEC on Form 8-K. If you want a copy of the release, please visit our website 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 888-203-1112. You can hear the replay by dialing the toll-free number and then entering ID number 47896665 when you hear the prompt. In addition, we are simultaneously webcasting this call, and a replay can be accessed on our website beginning today at 5:00 p.m. Pacific Daylight Time.

Before I 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 risks and uncertainties, which are more fully described in the documents that we file with the SEC, including our 8-Ks, 10-Qs and 10-Ks. These forward-looking statements may differ materially from our actual results.

Now, I'll to turn the call over to Harold. Harold?

Harold Hughes

Thanks, Satish. And good afternoon, everyone, I would like to start by talking about the just completed financial restatement. It was truly a tremendous effort by Satish and the finance team. They had to work through an analysis and audit process that spanned hundreds of thousands of documents. The long process entailed many thousands of man hours of efforts to complete the restatement of our historical financials.

I sincerely thank our stockholders, for their patience and perseverance during the many months it took to work through all of these issues. You can rest assured that we are absolutely committed to operating with highest standards of corporate governance and providing the market with timely and transparent reports of our financial performance.

Now, regarding our third quarter results, we achieved revenues of $41.7 million; this was on the low end of our guidance, it was down from the prior quarter. While we are still making progress on our strategy, providing critical memory architecture technology to leading systems and semiconductor companies. Our short-term results were nonetheless impacted both directly and indirectly by the limited order issued by the FTC.

As we talked about in an earlier call, we expected to see a significant slow down in licensing momentum, while we implemented the actions required to comply with the FTC's order.

It takes some time for all parties to digest the complex nature of the order, there was a slow down in momentum, more than anything else, that led to the results at the low end of our revenue guidance.

The actual payment held in banks in accordance with the FTC's orders were only about a $1million dollars, so far. In any case, we have restarted a number of licensing negotiations that had been stalled following the FTC's action, and are again moving forward on that front.

Meanwhile, we got a number of exciting developments on the products side of our business discussed, whether in computing, consumer electronics or mobile devices, the need for greater bandwidth is a common theme, as electronics deliver more rich media, more 3D graphics and more video.

Rambus' leadership memory architectures are on the forefront in meeting this need. And earlier this month Elpida announced the availability of 4.8Ghz XDR DRAM device. Elpida is a trailblazer in bringing the world's fastest memory to market. And we are very pleased to be their partner.

Also last quarter, Toshiba unveiled the new Spurs engine, a high performance stream processor derived from the Cell Broadband Engine. According to Toshiba, the Spurs engine is designed to take video processing in digital consumer products, to new levels of realism and image quality.

Spurs engine integrates four of the Cell BE’s high performance risk cause, the hardware dedicated to decoding and encoding MPEG2 and H.264 video. Toshiba showcased its Spurs engine at CEATEC in Tokyo, earlier this month. It uses XDR memory to achieve the high data transfer rates for amazing rich media performance. We originally announced the XDR technology license we signed with Toshiba for this program a year ago. We are happy to be able to discuss another exciting application that delivers breakthrough performance, thanks to the XDR memory architecture.

Two weeks ago we held our Annual Developer Forum in Taiwan, where we hosted over 200 engineers -- a record number. We came to learn about designing with our leadership and industry standard memory architectures.

One of the highlights from the event in Taiwan was a presentation by Leon Kerkhof, a Senior Systems Architect for Philips Consumer Electronics. Leon discussed how HDTVs require high levels of memory bandwidth to deliver features, like advanced motion compensation and image enhancement, 12-bit color and the ability to handle multiple streams with HD content.

In fact, the next generation of HDTVs requires as much memory bandwidth as that of many PCs. At the same time, HD designers need a memory architecture to deliver this performance with the fewest possible devices to keep cost low, both in terms of the direct bill of materials as well as overall system complexity.

As Leo pointed out in his presentation, the high bandwidth per device performance of XDR makes it the ideal choice for HDTVs. We are very grateful for this endorsement, from a leading manufacturer of HDTVs, and excited with the prospect of enabling a new generation of consumer electronic products with the XDR memory architecture.

Also in Taiwan, we announced our new controller interface product for DDR3 memory. This solution provides a physical interface between the digital controller logic and DDR2 or DDR3 DRAM devices for data rates of up to 1600 MHz or 1.6 GHz. It leverages both our signal integrity expertise and utilizes key Rambus innovation, such as FlexPhase to enable robust DDR3 implementation at a gigahertz and above.

And speaking of innovations, our engineers and scientists continue to invent and develop technology for advanced memory architectures, high-speed logic interfaces and low power interface solution.

When measured, the pace of innovation at Rambus is our growing portfolio of patents, which at the end of Q3 stood at 667 issued patents, with another 519 patent applications pending. It's through this continued commitment to innovation that we deliver extraordinary value to our customers and enable breakthrough products that enrich the lives of consumers.

And with that, I will turn it over to Tom to provide an update on the legal front where all is not quite.

Tom Lavelle

Thanks Harold, and good afternoon, everybody. I would like to provide some contacts around some of the events that have taken place over the course of the last few months. Back in August, we received from the European Commission a Statement of Objections alleging violations of European Union competition law.

The Statement of Objections follows complaints by certain DRAM manufacturers originating from our '92 through '95 participation in JEDEC. We filed a response to that Statement of Objections today in Brussels. We believe the EC's allegations are misplaced, and we intend to demonstrate to the commission just that and we are working with them to get at that point.

Moving to the FTC action here in the U.S., on September 21, we filed our appeal of the FTC decision with the Court of Appeal for the District of Columbia Circuit in Washington. We expect the briefing will be completed shortly after the beginning of the new year. No oral argument has been set at this point, but we do expect to see a decision some time in 2008 on that case.

There have also been developments from some of our private litigations. In August, a hearing was held in front of a three-judge panel at the Court of Appeals for the Federal Circuit to argue the Samsung matter arising from the case in the District Court for the Eastern District of Virginia. We're hoping this decision will finally put this case behind us.

The first phase of the Micron trial in Bloomington, Delaware, addressing alleged spoliation and litigation misconduct by Rambus, is currently scheduled to begin November 8th of this year in Bloomington.

Moving on the price fixing case in the superior court of San-Francisco, the US Supreme Court denied Hynix’s petition to review Judge Cramer’s decision denying arbitration, in favor of a jury trial on Rambus’s allegation of price fixing and unfair practices by the three DRAM manufacture defendants. Discovery on that case has been proceeding, and the next hearing is currently scheduled for December 20th of this year. We expect the trial date will be set forth sometime in mid 2008.

In the Hynix patent case, the third phase is currently scheduled to begin near the end of January of 2008. You’ll recall that we won Phase I and Phase II, including a judgment of approximately $133 million plus interest. The Phase III trials will address Hynix’s allegation that we engaged in misconduct. This trial is currently scheduled to be a coordinated trial with Micron, Samsung and Nanya, because of the large overlap of issues and claims among those parties and Rambus.

There is clearly a lot going on with regards to our litigations, and our litigation expenses as disclosed in the press release reflect that increase activity. It’s been our strategy to move the private litigation matters forward to a resolution as quickly as possible. Our level and nature of the activity I just described reflects that we’re making progress on that strategy.

Now I'll turn the call over to Satish to review the financials. Satish?

Satish Rishi

Thank you Tom, as Harold mentioned earlier in the call we’re quite pleased to have completed our filings to be current with the financial report. It has been a long and grueling process, but one that we have to go through to ensure accuracy and completeness in our filings.

After our final outstanding 10-Q, we received notification from NASDAQ, that we regain compliance with the rules for continued listings, and that the matter is now being closed.

Again, we thank our shareholders for their patience, as we went through process of becoming current and are happy to be back to a normal reporting process.

Our revenues for the third quarter were $41.7 million, which is down 12% from the previous quarter and 9% from the year ago. Revenue decreased primarily as Harold explained, due to direct and indirect impact of the FTC's orders, and a scheduled decrease in payment, all the payments.

Operating expenses for the third quarter were $58.2 million, up 1% from the previous quarter and down 19% from the third quarter of last year.

Excluding the restatement related expenses and stock based compensation, operating expenses in this quarter at $45.3 million were up 14% from the previous quarter and 21% from the quarter a year ago.

The primary drivers for this were an increase in the general litigation expenses as well as incremental expenses related to audits accounting and related consulting.

Cost of general litigation, which excludes cost related to our restatement, was $11.7 million, up 75% as compared to the second quarter of 2007, and up 34% from the third quarter of last year.

The increase in litigation expenses that are [flag expenses] associated with the preparations for the responses to the appeal commission, the appeal of the FTC decision, Phase 1 of the Micron trial, the price fixing case in San Francisco and Phase 3 of Hynix patent case all of which Tom described in some detail.

Even though general litigation expenses increased quarter-over-quarter, our year-to-date general litigation expenses are slightly down as compared to the same period a year ago.

Within SG&A, incremental expenses related to audit, accounting and consulting were up $1.4 million as compared to the previous quarter. Other SG&A expenses were generally in line with spending in the previous quarter and the third quarter of last year.

Our operating loss of $16.5 million was up $6.3 million or 62% from the previous quarter and down 36% from the third quarter of 2006. The increased loss from the previous quarter was primarily associated with lower revenue of $5.8 million, increased non-restatement related legal expenses of $5 million, and the decrease in restatement related expenses of $3.3 million, while the decrease from the third quarter of 2006 was primarily associated with lower cost of restatement.

Bottom line net loss for the third quarter was $6.5 million compared to a loss of $2.7 million in the second quarter and a loss of $22.6 million in the third quarter of last year.

Overall, cash defined as cash, cash equivalents, and marketable securities excluding restricted cash, was $445 million, an increase of approximately $3 million from the second quarter of 2007 and up $24 million from a year ago.

This year-over-year increase in cash was not withstanding the fact that we had no cash generated from stock option exercises and that we paid out approximately $30 million in cash for restatement related expenses in the last 12 months.

During the quarter we also received notice from a trustee, who, on behalf of majority of our note holders, informed us that the holders of the $160 million of pending notes were extending the acceleration of the note and were waiving all existing Events of Default. The notes mature in 2010 and we have reclassified the notes back to long term as of end of this quarter.

Now that we are current with the filings, we should be able to restock our share repurchase program soon.

Now let me give you some thoughts regarding the fourth quarter. This guidance reflects our reasonable estimate and our actual results could differ materially from what I would like to review. We expect fourth quarter revenue to be between $45 million and $50 million and operating expenses excluding stock-based compensation, any additional restatement related expenses and one-time severance payment should be between $47 million and $55 million.

Litigation expenses are difficult to predict, because we do not control timelines and request from the courts, nor do we control the actions that adversaries may take which may cause us to incur additional expenses, in any particular quarter.

Including the range of operating expenses I just gave you, our general litigation expenses of $10 million to $16 million, a very wide range given the level of activity that we are expecting in Q4 of 2007.

Also, we would like to remind you that as we outlined in our 10-Q, we plan to hold our Annual Shareholders Meeting on December 19 at the Westin Hotel in Palo Alto and we look forward to see many of you over there.

That concludes our prepared remarks. Operator, would you please open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). We’ll take our first question from Jeff Schreiner with American Tech Research.

Jeff Schreiner - American Tech Research

Good afternoon gentlemen. Thank you for taking my question.

Harold Hughes

Hello Jeff.

Jeff Schreiner - American Tech Research

Wanted to dig a little bit in to the agreement previously with Infineon and Qimonda and the potential triggers that may relate to the extension of payments. Have those triggers been met, and will we additional revenues in future quarters from the Infineon group?

Sharon Holt

Hi Jeff, this is Sharon. With respect to the agreement which by the way is now with Qimonda, the agreement was transferred shortly after Qimonda was spun out of Infineon. Certainly if we had met any of the triggers you would have heard from us about that by now, because I think you’re well aware of what’s the triggers are roughly. That are part of that agreement. And we haven’t made any announcements about that.

We certainly continue to work towards positive outcomes in the litigation with the other players in the DRAM industry. And we certainly hope to trigger the follow-on payments from Qimonda, but we’ve made no announcements to that effect yet.

Jeff Schreiner - American Tech Research

Okay and , I was wondering Satish if you could talk a little bit about the commentary that was in the most recent Q, in relation to fix royalties actually not being affected by the SEC decision. Should we assume going forward that only agreements with variable portions are going to be included or encompassed by the remedy?

Satish Rishi

Jeff the SEC order is fairly complex and I am not sure we can do it justice in one or two sentences. But the application definitely is towards the variable royalty payment and for the fix royalty payers, each and every customers is treated differently. So you have to go and talk to the individual customers and see if any of their revenue that they believe, that is subject to the SEC orders above mark or not above mark. So I wouldn’t blanket it to say just that its related only to the fixed payers. But by and large at a higher level, I think , it should be right to say that the variable rate royalty payers have a bigger impact than the fixed payers.

Jeff Schreiner - American Tech Research

Okay. And then Harold recently there was a press release and I appreciate taking the time, in which you reported and saying that, there is going to be a breakout year in calendar year ’08. And I am not sure if you have misquoted or is that’s what you want to say, but could you reaffirm that statement today in kind of go over some of the drivers that you see, in terms of driving a breakout year for Rambus in calendar year ’08?

Harold Hughes

I don’t recall having used exactly those words and often times translations produce results maybe slightly different then what I had intended. But to add some inputs to that general concept, this is the year where many of the legal cases that we have worked very, very hard to bring to trial are coming to trial.

We remain optimistic that our position is the stronger one and the expense notwithstanding and sufficient time took you over, the enormous expense incurred in these trials. We look forward to getting in to court and winning, and as a result of which increasing significantly our chance of coming up with settlements, that we find acceptable.

Secondly, many of the markets, frankly all of the consumer markets, the PC markets are moving in directions of very, very high bandwidth.

And secondly, the explosion in handheld devices has added to the bandwidth requirement a very, very low power requirement. It's in those areas that we have excellent technology, have announced certain products and long as the marketing people next to me don't hit me. We intend to announce products some time during 2008 with regard to low power.

So, the combination of finally getting the court on some of these very important trials and having our proprietary products successful in the marketplace, we do believe are two factors that should allow for something, I don't know if I would ever have said breakout, but obviously puts us in a pretty advantageous position versus the DRAM industry that has been settled. Hope that helps.

Jeff Schreiner - American Tech Research

It does. Thank you very much for your time.

Harold Hughes

My pleasure.

Operator

We will take our next question from Mike Crawford with the Riley Investment Management.

Mike Crawford - Riley Investment Management

Thank you. First, on NAND, I think previously you said that NAND needed to go faster for that market to see the benefits of Rambus' controller IP. Is there anymore color you can provide on NAND, like how fast does NAND have to go before a Rambus solution really helps?

Sharon Holt

Hi, Mike, this is Sharon. I seem to recall from the last conference call when we spoke about NAND, and, I think, in general, when we spoke about Flash, we mentioned that we were working on some new technology to apply to Flash, and specifically to maybe enable the use of Flash in applications where it has not traditionally been seen. And so, we're continuing to work towards that.

In terms of a specific speed, I wouldn't say that there is a specific speed that would trigger the use of our technology, but if you tend to look at the performance levels of Flash versus DRAM, Flash does still lag behind particularly from the perspective of the interface and the performance of the interface. So that may be the comment that you are referring to.

Mike Crawford - Riley Investment Management

Okay, thank you. And I have another maybe, I don't know if Sharon this might be for you as well. But Transmeta just signed a $250 million settlement with Intel, and they have some low power IP. Is there anyway you can compare and contrast what they have, what you have, is it complimentary or is it competitive over, tell me whether you have some comments on that?

Tom Lavelle

My recollection is that with regard to various processes specific functionality, dealing with slowing down clocks speeds while still maintaining the system, and much of our technology, not surprisingly, is focused on high-performance memory and to the extent that we have controller technology enabling that. It tends to be somewhat removed from what Transmeta have.

Mike Crawford - Riley Investment Management

Okay, thank you. And then finally, I don't know if this might be for Tom, but there had been counsel change in Delaware and I think Greg Stone had to come into the case late. Is he comfortable that everyone is up to speed there and you are ready to go?

Tom Lavelle

We are very comfortable with Greg, as you probably know. Greg has done very well in our cases. I am very pleased that Greg is able to step in and do this. But he knows this case very well and we are lucky to be in a position where we have a Greg Stone working with us.

Mike Crawford - Riley Investment Management

Okay, thank you.

Tom Lavelle

Always good to give the ball to your best pitcher.

Operator

We will take our next question from Michael Cohen with Pacific American Securities.

Michael Cohen - Pacific American Securities

Thank you. Congratulations on getting current with your filings.

Harold Hughes

Thank you.

Michael Cohen - Pacific American Securities

My first question is for Tom. We are all eagerly waiting the CAFC rulings and that has to do with this spoliation issue in the Samsung case. And then we on November 8th are going to see the spoliation trial start in Delaware. I wonder if you could talk a little bit about what would happen if we don’t have the CAFC ruling prior to the start of that trial and how those two issues kind of relate to each other.

Tom Lavelle

Actually I don’t think the Delaware trial is going have any particular major impact, if we don’t hear from the CAFC first. We’re going forward with that, and our plans on the Delaware trial in front of Judge Robinson, irrespective of what happens in the CAFC. We’re obviously very hopeful about a decision in the CAFC, which could come down any time now, and it could happen before, it could happen during, it could happen after, that’s the case in the Delaware. Our plans are to go forward and win in Delaware irrespective of what happens at the CAFC.

Michael Cohen - Pacific American Securities

Yes, hypothetically the CAFC ruled first and ruled in your favor. Could you see a situation where collateral estoppel might apply and we wouldn’t even need to finish trials?

Tom Lavelle

No, actually not, they are different parties. It offers a very interesting concept and I would rather not give out a legal lesson on a conference call but, it doesn’t work that way unfortunately for us.

Michael Cohen - Pacific American Securities

Okay. My other question is I believe you have some patents up for reexamine in the PTO and I was wondering if you could talk a little bit, well that’s then.

Tom Lavelle

We’re comfortable with our patents, are well researched, well analyzed and will withstand scrutiny on the reexamine which as you were pointing out is happening in some of our patents, and as Harold pointed out earlier we've got a lot of patents. If one were to be found invalid, which so far has not happened, but if one were to be found invalid or was changed by the process, we have a lot of other patents, upon which we rely and which we think constitutes the value of this company going forward.

Michael Cohen - Pacific American Securities

Do you know off the top of your head how many are actually under re-exam?

Tom Lavelle

Actually, no I was just counting the number of active litigations on which were expecting outcomes and so I didn’t look at the re-exams and put it into that list, so no don’t, I don’t have that number with me right now. I am sorry.

Michael Cohen - Pacific American Securities

Okay. But you are confident that you have some patents that have already let's say Phase 2 (inaudible) state then deemed entrenched that are not for re-exam?

Tom Lavelle

We’re confident as confident as we can be, based on the status of the patents that have been already in front of Judge Whyte and continuing to go forward with those patents and frankly as we said there are so many other patents we have. I am not too concerned about any one particular pattern.

Michael Cohen - Pacific American Securities

Okay. And my next question, probably will be that for Sharon. There are some very interesting standardization efforts in the flash area called ONFI stands for open NAND flash interface, and when I was looking at this, it looked really like to be a perfect place for your technology. And I was wondering if you could talk a bit about, what you think about ONFI, if you think it’s a potential target market for the random technology or any comments do you have on ONFI?

Sharon Holt

Sure Michael. So, first of all yes we are familiar with ONFI and in terms of commenting on whether we would be specifically targeting some of our technology towards that, I guess what I would say in general is that what we try to do is rather than look at something that's already kind of out there in the standardized space, we actually try to look further ahead to solving new problems. So in that regard, we intend to run ahead of the market a bit. And so, as we're looking at our NAND efforts going on here, we're actually obviously engaging with potential customers, taking a look at very difficult system levels problems and how we could apply our Flash technologies to those. That's the approach we're taking versus looking at the existing Flash space and even existing standards in the current Flash market.

Michael Cohen - Pacific American Securities

Okay, thank you. And my last question is for Harold, this is a kind of expanding on the question that Jeff already asked about the breakout year. There was a recent PC World article that came out a few days ago and it stated that you see 2008 as a breakout year for Rambus technology to enter higher volume production, as it wins over some HDTV clients. You already talked about Philips. It used the word clients plural. I was wondering if you could talk a little bit more about the HD, high-definition TV space and how you think that fits into 2008 been a potentially good year?

Harold Hughes

Well, I think that specifics of the market are extremely high bandwidth requirements and growing at rates, I think it surprise even us. And coupled with the high bandwidth requirement is the high bandwidth per device requirement in order to keep the clocks of the systems down in the system architecture, because these are becoming literally PCs within a TV less complicated.

XDR, we believe is the ideal market as far as the XDR to enter. Obviously, we are engaging with as many of those designers as we can. Now, we will announce those well in advance to finding them. And many times as we pointed out in the past, even when we do sign them, our customers are reluctant to allow us to talk about it and we never pre-announce the customer's product. So, we ask your forbearance here.

Michael Cohen - Pacific American Securities

Okay.

Harold Hughes

That there will be a while, but Sharon is working very hard in that area.

Michael Cohen - Pacific American Securities

Okay. Another thing the PC World article talked about is the XDR technology making headway into cell phone's mobile devices, another area you touched on in the script. Is there any comments you would like to talk about in terms of a low power that you have coming in?

Harold Hughes

I think that's the issue that I touched on earlier. It is amazing what people are doing with cell phones up to and including receiving broadcast full motion video. This produces two very, very difficult to solve problems.

The number one, the memory has to have a bandwidth necessary to decompress and allow the presentation of full motion video. And number two, and probably even more vexing, that needs to be done with very, very little power dissipation.

You may recall that in January of this -- February of this year, we had a paper at ISSCC, they talked about our new technology in that area. So, the combination of that technology in the high bandwidth made possible by the XDR architecture, again would be a pretty good solution for the role of cell phone manufacturers.

Michael Cohen - Pacific American Securities

Okay. And I missed the presentation from the International Solid-State Circuit Conference, is that technology at a Capitol Hill?

Harold Hughes

That's correct.

Michael Cohen - Pacific American Securities

Okay. Thank you very much.

Harold Hughes

Thank you.

Operator

(Operator Instructions) We'll go next to Hamed Khorsand - BWS Financial

Hamed Khorsand - BWS Financial

Good afternoon. My question was regarding the sequential decline that there has been in the royalty revenues? And wanted to see what kind of assumptions are you using Q4?

Sharon Holt

Hamed this Sharon. Well, I can't obviously speak specifically to the details that are in the Q4 guidance. Clearly we’re counting on an improvement over what we did in Q3. As we have mentioned in the last few calls, we have a lot of new business development efforts going on, both on the product side as well as on the patent licensing side.

We also do expect to see an up tick from customer engagements that are already underway. Some parts of our business do experience seasonality, especially consumer electronics, where there are builds and preparations for the Christmas season. So, we do see up ticks in royalties from a number of sources. So, we have got I would say all three of those things in play here in the fourth quarter.

Hamed Khorsand - BWS Financial

Just didn’t talk today on the conference call about the HD-TV’s and the previously with Texas Instruments. Is that the focus to see them move forward on the consumer electronics side?

Sharon Holt

Well I think it depends on what you put into the consumer electronics category. Right now we have four major markets of focus. We continue to focus on computing systems, which has been a traditional area for Rambus and high performance memory interfaces.

We also, as you know for many years have been a participant in the game console market, and we continue to focus on that for future platforms. In addition the HD-TV market, which we talked about here. And then mobile, which is really a new market of focus for Rambus as we look at taking our low power technologies and applying them outside of our traditional market segments.

Hamed Khorsand - BWS Financial

Okay. My last question is regarding the $1 million is been held by FTC, now is there been a transition away from the DDR to the FTC by those customers to DDR, technologies is not under the FTC ruling.

Satish Rishi

Hamed this is Satish. No, not that we are aware of.

Hamed Khorsand - BWS Financial

Okay. Should we expect that to happen with the new DDR replacing the older DDR that’s been used currently by those customers?

Harold Hughes

Are you talking about the transition to DDR3?

Hamed Khorsand - BWS Financial

Yeah.

Harold Hughes

Yeah, obviously over time that takes place, and as a result the model rates in the FTC ruling have less impact. But how and when that transition takes place, we’ll be reluctant to speculate that time for now.

Tom Lavelle

And for clarification the FTC is not holding any of the money it's either an Escrow or held in the bank.

Operator

That does conclude our question and answer session today at this time I would like to turn the call back to over to our speakers for any closing remarks.

Satish Rishi

Thank you everybody for joining our call. We look forward to seeing you at the annual shareholders meeting. Thank you.

Operator

This does conclude today's conference call. We appreciate your participation you may disconnect at this time.

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