Rambus, Inc.
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Reputational Issues – Here and ElsewhereDear Fellow Long Term Rambus Shareholders, Since last September I have posted here thirteen times -- starting with observations about the FTC and most recently (and extensively) addressing the adverse spoliation decision from Delaware and a resulting stay in California. The reception here to my posts has been (on the whole) highly supportive. Thank you. I greatly appreciate it. Also, and more critically, I think recent and past commentary here about me underscores something critical about Rambus. Rambus is a remarkable but tiny company. It is not Intel. It must be realistic and open (with itself and others) about the “big picture” context of court rulings (good and bad) and – most critically-- about the fundamental centrality of its patent and antitrust litigation. In the face of Rambus’ recent, sudden market capitalization declines (55% in the week following the January 9 Delaware decision, almost 22% in after-hours trading following the resultant stay this week in California), it cannot afford to do otherwise.
This leads me to what may seem, at least at first, to be old business.
When I left the Rambus GC position in 2006, my departure generated innuendo and a number of accusations concerning, among other things, blame for adverse litigation results in mid 2006, licensing problems, and stock options backdating. These accusations and this innuendo show up in contemporaneous press accounts (still prominently displayed if one Googles “Danforth Rambus”) and also – still -- in some posts here. They were also the focus of many 2006-07 postings here by the Rambus CEO’s wife, who used the name “clarissamehitable”, and whose work and identity I repeatedly provided to Rambus, beginning in 2006. www.law.com/jsp/article.jsp?id=900005556582.
In 2006, I was (from several sources, not just here) made aware of the risk that I could easily be made into a “sacrificial lamb” for one or more of these issues. An example is one effort (of many) “clarissamehitable” made to link me to stock option backdating: “if anyone was involved in backdating, who do you think that it would be?” (message 3639). To counter speculation like this, I have, at various times, proposed public rebuttals that I (or, ideally, Rambus) might make. In response, I was told to wait until the Rambus Special Litigation Committee ended its work.
Now that work appears to be finally done. Let me therefore turn first to stock options backdating.
My court filings in cases related to options backdating show I was not, in fact, responsible for this practice at Rambus, or for any inaccurate accounting arising from it. See, e.g., http://investor.rambus.com/downloads/2007-04-02 Danforth mtd.pdf. Recent Rambus court filings and a judgment of dismissal are in accord. They ought to now put this matter entirely to rest: See:
Other harmful speculation– e.g. repeated press reports saying that I left the Rambus GC job “following” a series of adverse litigation results – is similarly misplaced. Last November I sent Rambus a draft statement to make this clear. It elicited no response from Rambus but its gist was essentially this:
And these issues ought not to taint my tenure at Rambus. The specific litigation reversals that Rambus suffered in mid-2006 have since been largely resolved in Rambus' favor. I had no significant role in the AMD deal. Nor did I have a significant role in Rambus’ option granting process. This leaves open the question of why Rambus decided to change GCs. The CEO declined to answer an analyst question about this, but my opinion is that the answer fundamentally lies in differing views of the business. My strong view was (and is) that, because of its strong patents and troubled history (including the destruction of its core RDRAM business), Rambus was and is highly unique-- i.e., I believe that litigation-centric factors overwhelmingly drive Rambus’ market capitalization (as should be obvious from events last month and this week), that they should strongly influence business decisions, and that they are the critical things that (from an investor relations perspective) need to be swiftly, effectively and openly communicated to investors. I have previously discussed aspects of this (not very surprising) view here: http://investorvillage.com/smbd.asp?mb=3666&mn=317035&pt=msg&mid=6448228. It may be understandable that my views were not, in 2005 and early 2006, an easy sell within Rambus’ senior management team. The company significantly focused on Rambus’ “leadership” products. Management also publicly expressed the view that the Rambus licensing pipeline had been “capacity constrained” and was facing a “bottleneck”. It was these differing viewpoints and related organizational changes (e.g., moving key Rambus licensing lawyers from legal to sales in October, 2005) that set the stage at Rambus for a new GC. My transition from the GC role to another role was contemplated by my January, 2006 employment agreement. A key step in this transition took place in late June/early July, 2006, when Rambus appointed an acting GC.
In closing, I should, perhaps, say the obvious: being the GC of a well-known, remarkably-talented, high-stakes but beleaguered small company is sometimes a rough business. It requires, among other things, patience and a thick skin. I hope I have shown adequate measures of both by waiting this long to issue this statement. None of this affects my view of Rambus’ litigation prospects.
Best regards
John Danforth
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