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Reacting to OEMs

Linley Gwennap, principal analyst at the Linley Group, said Intel "is running into continued resistance in the market by [manufacturers] concerned about [RDRAM's] price, the difficulty in implementing RDRAM, and license fees if you want to build your own interface."

Michael Slater, well-known microprocessor industry guru and now part of PhotoTablet, an Internet startup company working on information appliances, agreed. "Rambus is not getting the adoption in the industry and by OEMs, and prices are not coming down as fast as they want," he said. In such circumstances, he said, why should Intel limit the Pentium 4's success because of a "religious attachment" to a particular memory architecture?

Even the slowest speed RDRAM, the 600-MHz version, typically costs at least twice as much as PC-133 SDRAM when purchased separately. RDRAM's cost premium over SDRAM will be about 25 percent next year and should drop to 5 percent in 2002, Kanadjian said.

DDR SDRAM Steps In

Intel's announcement is a blow for Rambus and means it won't be the mainstream standard this year or next. According to Gwennap, RDRAM still looks to be better for the very-high-performance segment of the PC market. However, that segment is not that big anymore, he said. (PC World tests showed that Rambus does beat SDRAM in select, graphics-intensive applications such as AutoCAD.) And most of the mainstream of the market should be satisfied with SDRAM and DDR, he said.

As the high-performance successor to SDRAM, DDR may reap the most benefit from Rambus's troubles. According to Gwenapp, "[DDR] price premiums over SDRAM should be down to nothing in the second half of next year," which is when Intel is expected to release its SDRAM chip set for Pentium 4.

There is some question of whether the picture is really so rosy for DDR SDRAM. A recent report by Peter M. Glaskowsky in Microprocessor Report suggests that in the future, higher royalties on DDR SDRAM could shrink the price advantage DDR now holds.

Gwennap expects that a DDR chip set for the Pentium 4 will follow hot on the heels of Intel's release of the P4 SDRAM chip set. Already, VIA Technologies and Acer Laboratories (affiliated with Acer Inc.) have announced plans to offer motherboards for AMD and Intel processors with DDR support.

Rambus may be hard hit by this week's news. The company's stock rose to a high of 117 in June after a stock split and has been in slow decline since. The stock closed at 75 1/2 Wednesday, an 11 percent drop from Tuesday.

Tom Mainelli contributed to this report.