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Rambus Inc. (NASDAQ:RMBS)

Annual Shareholder Meeting Call

April 26, 2012 12:00 pm ET

Executives

Harold Hughes - President & CEO

Tom Lavelle - SVP & General Counsel

Analysts

Michael Cohen - MDC Financial Research

[Abrupt Start]

And thank you for joining us at the Rambus Annual Meeting and thank you for joining us on the web. Before proceeding further, I would like to introduce the Directors and Director nominees of the company who are here with us today. And if you can please stand when I call your name. Tom Bentley, our Chairman; Penny Herscher; Eric Stang; please stand; Dave Shrigley and Sunlin Chou. Thank you. And if I may also introduce the Rambus officers who are here today. Tom Lavelle, our General Counsel; Satish Rishi, our CFO; Sharon Holt who runs our Semiconductor Group; and Martin Scott, who runs our New Business Group.

Also it is today are our audit partner, [Samira Shikar] come here thank you. Aaron Alter from Wilson Sonsini, who has been with us for quite some time. Samir helps us through the complicated ever-growing competitive world of accounting nowadays. I will like to chairperson this meeting and I have asked Tom Lavelle, our Senior Vice President, General Counsel and Secretary to facilitate and record the minutes of this meeting. Tom?

Tom Lavelle

Thanks Harold. If you have not yet received your copies of the agenda and meeting procedures, please raise your hand and copies will be provided to you. In order to ensure that business of the meeting proceeds in an orderly fashion, we ask that you please observe the procedures.

I want to remind you that attendance of this meeting is by invitation only and I trust everyone has registered prior to entering this room. If there is anyone who is not a stockholder of the company, a designated proxy of the stockholder of the company or especially invited by the company to attend the meeting, we ask you to leave the meeting at this point. Thank you.

The Annual Meeting is being held in accordance with the company's bylaws Delaware laws. We will first address the matter described in the company's proxy statements dated March 15, 2012. We will then complete the balloting process. An announcement will be made regarding the voting results and then the official portion of the meeting will be adjourned. After that there will be a presentation regarding the company and an opportunity for stockholders to ask questions of the company's officers and directors.

During the first part of the meeting, until the ballot is closed, questions should be restricted to the procedures for the meeting and the proposal under consideration. I have proof by affidavit that notice of this meeting has been duly given and that the notice of the annual meeting of stockholders, proxy statement and proxies were mailed on or about March 15, 2012 to all stockholders of record at the close of business on March 1, 2012, the record date for the meeting.

We have at this meeting a record of stockholders as of that date. The affidavit together with copies of the notice, proxy statements and proxies will be filed within minutes of the meeting. We have appointed [Richard Chen], Senior Corporate Counsel of Rambus Inc. to act as the inspector of election for this annual meeting.

The inspector of election has signed an oath of office which will be filed within minutes of the meeting. Based on the preliminary review of the proxy cards submitted prior to this meeting, the inspector of election has determined that out of an aggregate of more than110 million shares of the company's common stock issued and outstanding as of the record date, were holders of at least 88 million shares of common stock are present or represented at the meeting which represents approximately 80.13% of all outstanding shares. That constitutes a majority of the votes eligible to be cast by the holders of shares of common stock issued and outstanding. A quorum is therefore present, the meeting is duly constituted and the business of the meeting may proceed forward.

Let me briefly describe the voting procedures. We will vote by proxies and by written ballot if necessary. Each holder of common stock is entitled to one vote for each share of common stock held in record at the close of this on the record date. If you have completed, if you have a completed proxy that you wish to file with the inspector of election now, please raise your hands so we can collect it at this time.

If you have previously turned in your proxy and you do not intend to change your vote, it's not necessary that you complete another proxy or ballot, your vote will be and probably already have been counted. If you're eligible to vote and have not submitted your proxy or if you want to change your vote, please raise your hand and we will give you a blank proxy to use as a ballot.

I will announce the preliminary results of the voting at the end of the meeting. Does anyone have questions regarding the voting procedures before we begin the voting? Hearing none, it is now 9:05 on April 26 2012 and the polls for each matter to be voted on at this meeting are now open.

The first item of business is the election of directors. The company's Board of Directors presently has eight members and is divided into two classes, each with an overlapping two-year term. There are four Class I directors and four Class II directors. The Class I directors will be elected at this meeting. As indicated in the company's proxy statement, the following four individuals are nominated by the Board of Directors to serve as Class I directors, J. Thomas Bentley; Sunlin Chou [Ph.D.] Harold Hughes and Abraham Sofaer. All of these nominees are currently serving as directors of the company.

The directors elected at today's meeting will hold office until the 2014 annual meeting of stockholders for until their successor are duly elected and qualified. [Results] of the notice of this annual meeting, the proxy statement dated March 15, 2012, the proxy solicited by the Board of Directors will be voted in favor of these nominees.

The company's bylaws require that each director be elected by the majority of votes cast with respect to such director and uncontested elections which these are. The Board of Directors after taking into consideration a recommendation of the corporate governance and nominating committee of the Board will determine whether or not to accept the pretended resignation of any nominees or director in an uncontested election who receive a greater number of votes against this election and vote for such elections.

There are no cumulative voting rights in the election of directors. Stockholders as of the record date may vote their shares for or against some, of or none of the (inaudible) nominees. This item is discussed on pages 7 through 18 of the proxy statement. Are there any questions concerning the director elections?

The next item of business concerns a non-binding advisory vote to approve named executive officer compensation. This proposal seeks the approval of our stockholders of the compensation of our executive officers as disclosed in our proxy statement and the compensation discussion and analysis included therein. The board has recommended a vote in favor of the compensation of our executive officers as described in the proxy. The approval requires the affirmative vote of the holders of a majority of the votes cast, excluding abstentions at this meeting. Broker non-votes are not considered votes cast.

The company's goal for its executive compensation program is to attract and retain exceptional individuals as executive officers who will provide leadership for the company's success. The board believes that the company's executive compensation program achieves its goal with its emphasis on long-term equity awards and performance based compensation. Are there any questions concerning the non-binding advisory vote on executive compensation?

The next item of business concerns the stockholders being asked to approve an amendment to our 2006 equity incentive plan to add 6,500,000 shares to the total number of shares reserved for issuance under the plan. Our Board of Directors has approved this proposal subject to approval from our stockholders at this meeting. If stockholders do not approve the amendments to the 2006 incentive plan, no shares will be added to the total number of shares reserved for issuance under the plan.

Our Board of Directors believes that long-term incentive compensation programs align the interest of management, employees and the stockholders to create long-term stockholder value. Our Board of Directors believes that subject to plans such as the 2006 incentive plan are critical for us to recruit, reward, motivate and retain talented personnel.

Given a highly competitive labor market for our employees, our Board of Directors and management believe that the ability to continue to grant equity awards will be critical to the future success of Rambus. This item is discussed on page 20 to 31 in the proxy statement. The Board of Directors recommends that the stockholders vote in favor of this proposal and a proxy solicited by the board will be voted in favor of this proposal. Are there any questions concerning the amendment to our 2006 equity incentive plan to add 6.5 million shares to the total number of shares reserved for issuance?

The next item of business concerns the stockholders being asked to approve an amendment to our 2006 employee stock purchase plan to add 1.5 million shares to the total number of shares reserved for issuance under that plan. Our Board of Directors has approved this proposal subject to approval from stockholders at this meeting. If stockholders do not approve the amendment to the 2006 purchase plan, no shares will be added to the total number of shares reserved for issuance under the plan.

Our Board of Directors believes that the approval of the amendment is essential for our continued success as the addition of shares will enable us to continue to use the 2006 purchase plan to achieve employee performance, recruiting, retention and incentive goals. In particular, our Board of Directors believes that our employees are most valuable assets and that the awards permitted under the 2006 purchase plan or vital to our ability to attract, retain and motivate employees to achieve our goals. This item is discussed on page 32 to 37 in the proxy statement.

The Board of Directors recommended that stockholders vote in favor of this proposal and a proxy solicited by the board will be voted in favor of this proposal. Are there any questions on this particular proposal?

The next item of business concerns the stockholders being asked to approve a one-time stock option exchange program for eligible employee stock option holder. The proposed exchange program would enable our eligible stock option holders to surrender certain under water stock options that have an exercise price above $14.50 per share of our common stock with cancellation and exchange for new options to be granted under our 2006 incentive plan to purchase a reduced number of shares based on a specified value for value exchange ratio.

Due to declines in our stock price primarily as a result of adverse litigation decisions in 2011 and due respect to of the improvements on our recurring revenues and page assigning licenses during the last year, approximately 97% of stock options are under water. Meaning the exercise price of each of those stock options was greater than a per share fair market value of the company’s common stock as of March 1 2012.

This means that a majority of these stock options are no longer effective incentives to achieve employee performance, recruiting, retention and incentive goals. Our Board of Directors has approved this proposal subject for approvals with stockholders in this meeting. If stockholders do not approve the exchange program, the stock options eligible for the exchange program would remain outstanding and in effect, in accordance with their existing terms.

We would continue to recognize compensation expense for these eligible options even though the stock options may have little or no retention or incentive value for employees. The item is discussed on pages 38 to 46 in the proxy statement. The Board of Directors recommends that stockholders vote in favor of this proposal and the properties solicited by the board will be voted in favor of this proposal. Are there any questions on the one-time stock exchange or stock option exchange program for eligible employees?

The next item of business is to ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2012. The audit committee of the board, which is comprised entirely of non-employee Directors, recommended to the Board of Directors that PricewaterhouseCoopers be appointed as independent registered public accounting firm.

As our independent registered public accounting firm, PWC would audit our consolidated financial payments for the fiscal year ended December 31, 2012 and perform audit-related services and consultation in connection with various accounting and financial reporting matters. PWC may also perform certain non-audit services for the company. This item is discussed on pages 47 and 48 in the proxy statement.

The board approved the selection of PWC as independent registered public accounting firm for the fiscal year ending December 31, 2012 and that’s in the stockholders for ratifications of the selection. If the stockholders do not approve the selection of PWC as an independent registered public accounting firm, the board and audit committee will reconsider the appointment.

The Board of Directors recommend that the stockholders vote in favor of this proposal and the proxy solicited by the board will be voted in favor of this proposal. [Sameer Shekhar] is present from PricewaterhouseCoopers and is available to answer the questions that will be appropriate if you have them at this time? There are none. Are there any votes that will have been submitted at this meeting and believe the answer is no. Okay. It is now 9.14 on April 25th 2012 and the polls for each matter to be voted on at this meeting are now closed. No additional ballots, proxies or votes and no changes or relocations will be accepted. The proxies and ballots have been tabulated by the Inspector of elections and the Inspector of election has provided to you a preliminary report on the voting results.

With regard to prop up proposal one, the four nominees, J. Thomas Bentley, Sunlin Chou Ph.D, Harold Hughes and Abraham D. Soafer were each elected with a majority of the vote casts and will hold office until the 2014 annual meeting of stockholders or until his or her successor is newly elected and qualified.

With regard to proposal two, the proposal on the advisory vote to approve named executive officer for compensation plan has passed with the majority or the smaller majority than we had hope. With respect to proposal three, a majority of the vote cast have voted in favor of the amendment of our 2006 equity incentive plan to increase the number of shares of common stock reserved for issuance under such plans by 6,500,000 shares.

With regards to proposal four, a majority of the vote cast and same voted in favor of the amendment to our 2006 employee stock purchase plans to increase the number of shares of common stock reserve for issuance under such plan by $1.5 million shares.

With regard to proposal five, a majority of the votes cast have voted in favor of the one-time exchange with respect to certain stock options held by our current employees. With regard to proposal six, the appointment of PricewaterhouseCoopers to act as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2012 has been ratified by a majority of the shares present and in person or by proxy.

The final results of voting including any ballots and processes recorded during this meeting will be set forth in the report of Inspector of Elections and will be included in the minutes of the committee. The final results will also be reported in an 8K filed with the SEC.

This annual meeting of stockholders is now adjourned. Thank you for your attendance and we will now proceed with our presentation and the Q&A period following the presentation by Harold Hughes.

Harold Hughes

Thank you, Tom. And again welcome both here and on the web. I would like to at least make a few comments about the vote regarding executive compensation.

As Tom said, we won the majority, but it was not the majority the size we would have like and we've already begun discussions with the compensation committee and we would take into consideration this oath as we look at how we compensate our executives. And I would be more than willing to take your questions as we finish the presentation.

So with that let me begin, obviously this is covered by the Safe Harbor rules. I will be reading it. Most of you probably should remember it by heart right now.

Rambus is a premier technology licensing firm. We have decided to break ourselves into two key business segments; one, semiconductor group, obviously the basis of the company’s development under Sharon. And we aggregated this large acquisition we have done, calling at the new business group and that is under Martin Scott. That is not to imply that there are not new businesses and that is within the semiconductor group and I will go to that over later.

Our customer licensing income in 2011 was $318 million. Revenue relatively close this year $312 million, made up of $268 million in recurring revenue and $44 million in non-recurring. As you probably now, we were founded in 1990. Our headquarters is now in Sunnyvale; next to market still, we have 510 employees throughout the world.

So I might go over some highlights. We signed nine licenses since we met last, a few points. From now and till the end of 2014, the aggregate revenue, contractual revenue we would expect to collect from those licenses is about $600 million, a significant number. Everyone including ourselves is frustrated by the fact that we don’t talk specifically about rates, every one of our customers see this as a competitive issue and is accessed to the extent that the numbers aren’t material, obviously it’s required that we list them but we keep them confidential.

I can’t say that in the signing of licenses that we have done especially reasonably, they’ve had minimal to any impact on our most favored nation type pricing. The big impact obviously to the extent that the litigation did not go well, but against the back which we hope to collect unfortunately because of those issues we’re getting.

Lastly, I think it’s informative to ask why would someone take a license with Rambus, because Rambus just loss litigation. And I would point out that in large part the litigation is a backward looking content. And what we do at Rambus, we have a large number of very capable engineers who create technology focused on what they believe would be of value.

Those obviously go to a patent process and ultimately that by virtue of the patent process is disclosed. So we don’t sit around, we’ve published, and if I can go to the end of this particular slide, 29 pages, which include in large part what we have discovered and what we expect then to take the market in the form of patent.

People see this; we not only do papers, but we take the ideas that our engineers have created, we put into test chips, so we can show something subsequent to the people in there. Last year as you can see some of this slide, we did eight test chips, many of which had multiple functionalities.

So people see that Rambus has a business model that continues. It’s focused more on the future. They also recognize that in large part much of the use of Farmwald/Horowitz had continued almost from the inception, it was just recently. As a result, there wasn’t much incentives to develop technology beyond re-engineering Farmwald/Horowitz. We obviously, focused on the future continue to invest there.

So I think customers make rationale decisions in looking at what based as an optimal time to take a license and for us it is very difficult given our business model to continue to develop valuable technology if we’re not working closely with the industry key partners.

Also during the year, we acquired Cryptography Research. It says here, they are currently shipping or have shipped 6 billion chips. The bulk of which are on smartcard that I’ll talk about later, they are moving into set-top boxes and even into cell phones. We paid a significant number for that. But it was a competitive situation and as I said in the past, we were not the highest bidder and I can only say at this point in time that I believe the acquisitions we made have great value, significantly greater value in what we made it.

To expand in the non-volatile memory and storage with the acquisition of Unity Semiconductor just recently; I remember when I started this job many years ago, I had assumed that the capacity increase in Flash would be such that they would have to go to a synchronous higher performance interface, simply because the performance would be so bad.

So indeed the capacity increase happened as I expected unfortunately, our virtual effected the sales and sales were so bad, so much of the dedication of the controller just maintaining the bad sales that they never got to a high performance Farmwald/Horowitz type interface. And as a result, those patents were tried before that happened.

But, we have recognized the problems with the sellers; we’ve processed with the bid sales in the current process and as a result we have been looking for an acquisition in this area. The Flash market is a big one; we think this will have great value down the road. My disappointment I understand it.

GE is beginning to ship light fixtures, now most of you know GE is a bulb company and not a fixture company and in conjunction with us they are moving into fixture market. And as I said, we could aid test chips on highly leading edge processes and (inaudible).

We now have what I think is an impressive and growing with the world class licenses, many of which are shown here. Again, to emphasize the point, it varies with our engineers are; it’s in working with customer, understanding what problems, they don’t know how to solve, we have the ability then find new ways of helping them and by helping them increasing our revenue.

The company as we all know at this time are focused on semiconductors and in the process of building that business we detained what we believe as expert and how to incentivize people. The innovation process is key to our success. How does that will happen? Is it in parts; is it not simply a science? And indeed having done that how to license? Quite sometime ago we realized that these particular capabilities would be useful for other types of businesses and we started our diversification program.

I would like to make some fairly extensive comments. First, across of the package of two to three major ones we have, obviously there are other smaller ones but these are the three major ones; semiconductors, lighting and display security. To get on top of this platform, as we tried here, the business itself must have intrinsic standalone value, it’s very important.

Secondly we prefer businesses that have a technology base which is customer oriented, so they have a productive way to work with customers to bring technology to market. But we have recognized in this world that simply having technology doesn't mean people will pay you. It's very important in the businesses we acquire that they have an underlying patent portfolio as a result of which we will have to do patent licensing.

Lastly and this is a key point, we want to have businesses which when we get to relicensing has broad impact on potential customers. As you all probably have in your respective pockets and purses right now, you have cell phones. Well, in the cell phone there is no small number of silicon semiconductors that we are aware of. They all have a backlit screen and everyone, almost in every industry now wants their devices to be secure.

So when we get the relicensing customers and that customer should be at the semiconductor level or the system level. All this is obviously going to be based upon how our customers want to interact with us. When we go forward and again providing that we price it rationally, I think we greatly increase the likelihood of relicensing and we reduce the chances of a need for litigation. This is a key part of our diversification strategy.

Take an example Samsung. Samsung obviously has a very, very large semiconductor business. They are one of the biggest cell phones and television manufacturers and as I said everyone wants their individual cell phone to be secure and their television to be secure. So we think that our, we continue to have abilities to license effectively.

And at the end of the day to the extent that you can continue with the license, you have more of an annuity model which I think ultimately will be very good for the stock price and probably expand the multiples. Now we will add to this, these lists and to the extent that our platforms can handle expansion and I would have to say that the first one that we did, the lighting and display as much as we had good slides showing the ability of the platform to expand, we had a few bumps along the road if you will.

But I think with the security business it went much, much smoother and I believe that within reason we can add things, things that we would acquire and to be perfectly clear here, the concept that I talked about are important, it's very difficult to anticipate what would be next.

And as we found with the case in both lighting and display and security they found us. They had problems similar to what we had experienced in semiconductors and they saw us as a place to come. And in the case of the displays, in the case of both lighting and plain security, in neither case were we the highest bidder.

We just showed ourselves with having a platform that allows them to be more successful. And obviously we have internal development as a result of which we can add to this diversification strategy. I think it's a model that we can grow quite a substantial company, hopefully equally profitable and clearly the higher stock rise in our current stock (inaudible).

Addressable market, this is always difficult because you can jump into the supply chain at any point and obviously the closer you get to the end product, the higher the core addressable market. We’ve tried here to put in the level at which we would license roughly. As you can see there is a very, very large semiconductor business here. Lighting is the physical lighting that you see and the display is primarily the [edgeless] backlight, also very, very big numbers.

Let me take this opportunity as we talk about addressable markets, in particular semiconductors and make a few comments about the DRAM market, clearly the basis on which the company was originally founded. It is roughly a 25$ billion to $30 billion annual market depending upon price, units I think has continuously gone up. It's only a question of prices at which they are sold.

Finally and I would wish that it happens sooner. We’re starting to see pretty profound segmentation in that market. It's no longer the case that Intel virtue of the fact that they had such a large portion of the DRAM industry could define a very, very low performance in power levels with the desire to get everyone over that level. By getting everyone over that level they guarantee not only supply, but supply at a very low price. They could get away with that in large part because their power issues were secondary. They plugging of this [PC] into the wall and because of the complexities of the modern, for operating systems, the amount of DRAM required, the capacity required was quite high, 8, 16, 32 DRAM.

Well bandwidth with these additives and when you have 32 DRAMS, you have significant, you have significant bandwidth and that its meeting Intel’s needs. Well, in the low power market you have exactly, in a cell phone 1 DRAM bandwidth per device and it is also greatly focused on power, greatly focused on power. It is a electrically significantly different part.

Server memory, even though electrically they are the same, we have found and talking with customers that the cost of soft errors, not hard errors where you can simply replace something. But the soft error is so high that they are willing to say a significant premium to companies like Samsung who then have the ability to hone their process with such a high level of integrity that soft error has dropped significantly and these sell at significantly higher prices than does the commodity run-of-mill DRAM.

We have also heard, I heard just recently the price that people are paying for high bandwidth graphics parts in order to feed the massive graphic engines that they are creating a 28-nanometer who have literally dozens and dozens if not hundreds of small graphic processing units on each chip. A segmentation is always good if your goal is to create more profit and as the segmentation has gone forward and prices have started to reflect that, at the same time there is what I thought would happen faster, but inevitably there is a constrict, there is a reduction in the supply of the market. You know the problems that Taiwan has, you know the problems that (inaudible) has but the same time segmentation has been going up, the ability of people to supply have gone down

One of the reasons that we were very interested in signing Samsung quite some time ago is our reckoning that much like Intel, you are financing its ability to simply continue to invest with our competitors who are constrained and Samsung was doing the same thing. And that's become very reflective in their market share in all of the markets we just described. If Samsung becomes more powerful they will have more ability to value prices at will and you can see that as that market share grows, this is good.

And why is it important to Rambus? I think one of the structural problems we had was the simple fact that based upon how Intel had created this market with so many suppliers as an identical and commodity parts, no one was making any money and if that is your biggest source of revenue, it's very difficult to got to someone who is losing money, whether they believe that they are using your patents or not and actually get a decent royalty rate. Also since there was no segmentation, there was less value to the technology that Rambus has been creating for quite sometime.

As I'll show in a bit, as these markets have segmented, now there is ways that Rambus can add a great yield of value to this. So that people now have something to protect, a value market to protect, this is quite good.

Next slide please. I've said many times that I think one of the key jobs of any CEO is to create job charters that attract and retain the kinds of people capable of increasing shareholder value. Obviously that's important throughout the company, but in our labs area, it is massively important and obviously these are very, very capable and giving them a charter, charter being a challenge quite frankly, is important to drive them forward. And for acting people again to look 10 years out, everyone knows the stories of people who create a great technology and never have got it into market because they just created great technology.

We have put in place the process and like all processes that you will see in retrospect how successful it was to think of great ideas as the first block show, select from those the ones that we think have the most promise but then unless we have operating groups run by Sharon and Martin to which those people need to go so we can take it into the product fold. So this is a good part of Rambus. It’s not a huge group but its sort of like only one part of it -- you need the right people to be effective and I think Rambus has shown that we can attract and retain the right people. And I have got a few comments on that as we go forward.

We started to break patents out between SBG and NBG, which you see here in a different color and I think if my math -- my math background supports me, that looks like a curve, linear line that we are growing quite nicely and very pleased with the patent creation.

This is a quick refresh now on our business model. We have businesses and we want to have standalone intrinsic value. We want them primarily to be technology-based but we are not naïve. We recognize that they don't have a strong patent position. We can't maximize the value of what they have. And lastly, we want them to complement one another when we get to the customer licensing level.

Let me go into a little greater detail on the semiconductor business. Thank you. We built leadership and industry standard parts and since this is Rambus, we've gone beyond that. We’ve actually found ways to put both on the same memory five. So the customer has the opportunity to the extent that we can find people to create a higher performance part to go with it without having the risk of not having the ability also to lose the industry standard part. We call the standard part --we think it is a quiet a remarkable future and we owe a lot of credit for the engineers who created it. It actually happens with a size increase insignificantly bigger than just the standard plus, a regular standard five.

Fundamental innovations in both high performance but also low power regard circuiting system. It wasn’t that long ago that everything we focused on and I think the bulk of the industry focus on was performance, performance, performance. We’ve shown a 20 gigahertz DRAM. But now everything has -- everything has a performance at a power on to it. Servers, everything. And I think we’ve shown some excellent technology in effecting that.

We look at advance packaging in system design especially with regard of Micro Bump, PSE, got some good things there. We started research in new classes of imaging system. This shows the leverage in the power of the company we have. With a few people, indeed if there are right people you can create some very, very valuable technology. We have two people, David Stork and Thomas (inaudible) who have done remarkable things here and its not we’re not that far away from having the ability to design some silicon and show some people some part. That shows our leverage and as it says here and as I talked about a bit ago. We made an acquisition of a flash replacement technology.

And if I might spend just a few minutes on that as likely, this is the unity score card if you will and it compares technology based on fab performance piece of use, low cost with some of the competitors. We believe that it has higher capacity and lower cost. Its performance between the right times are a lot better compared to the NAND market. But we think that there is a great value here. Going back to the principles that I talked about now a few times, its particular approach we believe can be successful in the market. Having said that, the patents which we acquired and we will continue develop as part of this operation according to Sharon, will have the flexibility broadly to other ways of attacking this market. But the things that, again then you have great value there. You might notice in the footnote that the manufacturing partner of Unity, with the company that most of you are familiar with, Micron. It has given us the opportunity to have a discussion with Micron, which Sharon has settled now on a basis that could be mutually supportive. Don’t having anything more to say about that right now but that’s not bad.

I think the (inaudible) has joined us here. Thank you [Jarret]. This is a good example of the many but I chose this one. We’ve develop technology that would allow zero idle power while maintaining fast turned on. One of the things that surprised me when we were going over the switch, in large servers how little time this actually being used to read to and write from DRAM. But if you don’t keep it constantly refreshed, the latency, attendant of the system is simply unacceptable. What [Jarret] and his team has come up with a way to take a DRAM from completely off to completely on in five nanoseconds, which is a period shorter than we take the operating system to get ready to address it. This has, by our estimation, an existing DDR3 device, a power savings as much as 30%. Now if take into consideration the people who are building these large server (inaudible), that’s a hydroelectric plant. It gives you some idea as to the power requirements here and how important the 30% saving is going to be. If those five nanoseconds that [Jarret] has assured me, we will get it down to far less than that. So thank you.

A good example of the type of work when the market starts to segment, when you start to see, when consumers of that particular segment see value that in finding ways to increase the chances of selling into that value market, there is a great opportunity to Rambus in large part because there is opportunities for our DRAM customers make more money.

New business group. Lighting and Display, this was developed by Jeff Parker who created the bulk of the technology and he has a team now of less than 60 and going back to the concept of leverage and what we do is with Edge-Lit, we have greater ways of coupling it effectively, films that improve the performance. Thinking about it just casually, you have a very, very bright source on the edge of a monitor. How do you then build impurity in a light guide, so that it uniformly reflects that light out and is close to the hundred percent of the lights that we are going in? And Jeff created the patents and as I said, we are going a forward in businesses that have both licensing aspects and product aspect.

The computer software needed to calculate who’d to put the reflectors on the light guide is quite sophisticated, and in the vision to giving us the uniform look, it gives us the ability that sounds a bit strange to direct the light in the direction of which you want to go. We can take that to system level. We develop the tooling required to do that and we even have one copy of all the manufacturing so as to be able to do prototyping in our facility in Brecksville, but having done the prototype then to be able to transfer manufacturing package more easily and more effectively to the large Asian manufacturing partners that we have. This is extremely exciting.

Now I learned a long time ago, it is never a good idea to announce your customer’s products, so I won't. On May 11th, if I am right Martin there is a show in Las Vegas called LIGHTFAIR. I really recommend if you get a chance to go. I think you will see some lighting products that seem impossible. There are very, very exciting highly recommended though. Edge lit lighting that's quite remarkable. And again, less than 60 people can leverage industry, if you recall back to the market size, very, very large market, most likely.

These are, shown here on the left are the stacks of technology needed to produce this. We believe that we have very, very powerful technologies and underlying patents in all those stacks. As a result, of which we have good discussions with monitor people, cell phone people, tablet, notebook and people looking to build next generation futuristic lighting which is still quite efficient, good to look at and obviously using the low power that is attended with the LED.

As I said earlier, going on a year now, we acquired CRI; much like LDT it has a brilliant guy Paul Kocher who again with a relatively small band of people if you will, all quite capable has created this technology. Everyone knows how important security, I am sure you all have your anxiety to the extent that you are secured.

Paul and his team has very, very good technology which in large part is hardware based. As a result of which it’s very, very difficult to get anything quite secured. We have a demo where if you want be very nervous about security from a distance of about five to 10 feet we can actually take through our analysis of how the security chip is losing power, we can take that then we can calculate it, we can abstract the key, if you will from that handset; that is a very frightening thing if you think about all the value that you want to have in your various handset and DTA countermeasure is a good business for us; we’re licensed to a lot of people.

The next blog to the right, and put the firewall, again it’s a relatively small couple 100,000 gate, a hardware module that goes into the bigger SoC’s where high value content appear. The long-term value here to us obviously to the extent that we are a semiconductor company that could be a good market for us.

But right now the content owners would love to be able to distribute content materially, directly to people owning televisions and cell phones probably more televisions, using more tablets and cell phone. So it creates a direct connection as opposed to going through whichever of the companies have currently used a middle man.

If we Rambus have secured that device and manage the keys, we believe that we can not only facilitate that process, replace some rule in the distribution of that money and hopefully grow a very, very large business there.

So let me finish with a couple of things. As the key thing I said I think in a call not too long ago that we anticipate just to calibrate you, that by the end of the year, about 15% of our revenue will be made up from business, revenue from the new businesses. I suspect and actually Sharon and I had this discussion quite frequently, when we get into re-licensing in a few years, it will be difficult to ascribe licensing income to one group versus the other because we are going to probably be signing larger corporate licenses which will cover lots of the technology that we have to offer.

We sometimes have different divisions on that, but I think the new business group and the technologies we have, while they run independently as I said, and we get into re-licensing, I think it’s going to greatly increase our chances of licensing people and reduce the chances of the requirement of litigation.

And so with that, I will end my presentation, my last thank you and open it to questions. None from the Board by the way, we will have the Board meeting later where you can ask the questions.

Question-and-Answer Session

Michael Cohen - MDC Financial Research

Michael Cohen from MDC Financial Research. Seeing that this is your last presentation, my question is how is the search for CEO going, what’s the criteria that you are looking out for your replacement and any kind of update you can give us?

Harold Hughes

Well, the first criterion is that he or she be quite younger than I am, I think. I am 66; I mean it’s time to retire. We have a hired a well known search firm, a fund firm and they have started to put together a list. We have a committee that’s working directly with them. It come up with a list. We have been interviewing those people.

We have, as I said many, many times very strong internal candidates; and I believe the processes coming to the -- I will be very surprised if we haven’t completed this by the end of the quarter; not to put too much pressure on those who are doing this. If I were to Greek postal worker, I would have been retired for 20 years right now. Of course I would be in a bankrupt country as a result of that. Questions please? No questions, okay.

Thank you again for coming, appreciate it. I probably wouldn’t be next year.

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