Good day, ladies and gentlemen, and welcome to the Rambus Incorporated Fourth Quarter 2013 Conference Call. At this time all participants are in a listen only mode, later we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions]. As a reminder today’s conference is being recorded. I would now like to turn the call over to Satish Rishi, Senior Vice President and Chief Financial Officer.

Thank you, operator, and welcome to the Rambus fourth quarter and full year 2013 results conference call. I'm Satish Rishi, CFO. On the call today with me today is Ron Black, our President and CEO. The press release for the results that will be discussed here today has been filed with the SEC on Form 8-K. A replay of this call will be available for the next week at 855-859-2056. You can hear the replay by dialing the toll-free number and then entering ID number 37074711 when you hear the prompt. In addition, we are simultaneously webcasting this call, and along with the audio, we are webcasting slides. So even if you're joining us via conference call, you may want to access the website for the slide presentation. A replay of this call can be accessed on our website beginning today at 5:00 PM Pacific Time. In an effort to provide greater clarity of financials, we are using both GAAP and non-GAAP pro forma format in our press release and on this call. I need to advise you that the discussion today will contain forward-looking statements regarding our financial prospects, litigation and demand for our technologies among other things. These statements are subject to risks and uncertainties that are discussed during the call and may be more fully described in the documents we file with the SEC including our 8-K's, 10-Q's and 10-K's. These forward-looking statements may differ materially from our actual results and we are under no obligation to update these statements. Further, as mentioned, we will also discuss non-GAAP financial results today and have posted on our website reconciliations of these non-GAAP financials to the most directly comparable GAAP measures. You can find a copy of our earnings release and the recon on our website at rambus.com on the Investor Relations page, under Financial Releases. Now, I'll turn the call over to Ron.

Thank you, Satish, and good afternoon, everyone. Q4 was another good quarter for us as we closed the significant Micron deal and delivered CLI revenue and pro forma operating income at the high end of our guidance. As we reflect back on the entire year I have to say that I am incredibly proud of what the team has accomplished. 2013 was certainly a year of transition as we implemented our strategy of proprietaring broad licensing options based on consumer needs; approach the market in a more open and collaborative manner and focus investments to achieve optimal shareholder value creation. Clearly the most important accomplishment of 2013 was settling the long standing legal matters with both SK Hynix and Micron as well setting up the resigning of Samsung to a very long term license. Of course our shareholders value not only the stability of the cash flow but also the magnitude of the deals which totaled approximately $1.2 billion. Our more open and collaborative style was not just to close these deals however but to set up engagements with customers on new projects which was impossible to do when we're in litigation and to be honest shunned by the industry. As I mentioned during the Samsung announcement call, we are now engaged with all our customers in openly discussing collaborations on new designs and even delivering higher value products such as chips and software. Looking more broadly at the semi-conductor industry this was a good time for us to have resolved our past issues, as the memory market is no longer a segment of the industry known for bad economics. Indeed the consolidated structure has enabled a significant improvement in profitability and based on the significant increases in market capitalization investors concluding memory companies are back in vogue after a…

Thanks, Ron. As a reminder we use non-GAAP for pro forma numbers which we believe are indicative of company performance as we include certain cash events and exclude certain non-cash and discrete events such as impairment charges, restructuring charges as we believe these are not indicative of long term performance. Customer licensing income is a non-GAAP measure that includes cash proceeds that we receive for undersigned patent license agreements as well as cash proceeds from the sale of IP our products. It is how we measure the top line of business and may be different than revenue within a particular period with the amount of cash received from customers is different than the revenue recognized. As Ron mentioned during the quarter we booked restructuring as well as asset impairment charges related primarily to our LDT division. We have evaluated the fair value of the long term assets and compared them to the carrying value of the assets in the balance sheet. Our fair value of the long term assets was lower than the carrying value of these assets and we took an impairment charge of 9.7 million primarily related to the lighting division. We also right sized the business reducing our headcount in Brickfield and took other measures to reduce operating expenses and as a result incurred a restructuring charge of 2.2 million during the quarter. The pro forma numbers will exclude these one-time charges. Now let me review some of the financial highlights of the fourth quarter and the full year before going into additional detail. Customer licensing income for the fourth quarter was 73.9 million, at the high end of our guidance of 70 million to 75 million and our revenue for the quarter was 73.4 million. For the full year CLI was 281.6 million, which is an…

Ladies and gentlemen please remain on your line, your conference will resume momentarily.

[Operator Instructions] The first question comes from Suji De Silva from Topeka.

You talked about expecting some incremental revenues in the DRAM customers. May it right to understand that would mainly come from driving R+ adoption through the customer base and if that’s so what kind of timing are we looking there. And can you just remind me the business model for R+ as we look to that in ’14.

And R+ would drive the majority of the incremental DRAM revenue looking for or are there elements [indiscernible].

Understood. A quick question on the numbers, are the gross margin even the non-GAAP one, drop from 1Q to 4Q in ’13, I think 93% to 86%, is there a trend there that we should be aware of or just how to model gross margins going forward, Satish?

I think the changing gross margin is really related to the LDT business because for LDT the [indiscernible] of the gross margins given it’s a buy, selling products, it is not even close to where we are on the IP business. So as that business grows, it does impact our gross margins slightly.

And in to ’14 should we expect now that the restructuring's happened, that would attenuate somewhat?

Somewhat but I think as I mentioned it’s collectively -- it might be about 8% to 10% of our business. So there will be some pressure on the gross margin, but I think the guidance I gave overall keeping our operating expenses flat and giving you the close to the bottom line numbers I think you show know the back end of the gross margin would be.

Okay, that helps and just last questions, Ron, I mean right after you guys signed with Samsung. I know that Samsung did a deal with Google and Erickson. I know you can’t speak directly to Samsung’s motivations, but can you just talk to that what might be kind of a shifting climate in the thought process in patents and litigation versus collaboration because it seems very timely that all happened at the same time? Thanks guys.

Yes another good question and you’re absolutely right. We can’t comment on Samsung and their motivation. From our perspective, we’re just looking at the memory industry is really being a very in vogue, sexy, industry that has a lot of things happening in it. So if I was to be more positive on this, I think people look at our technology and say well if they have a different business model that’s easier to get along with and more reasonable on the pricing, why don’t we work with them because there is a lot of vehicles stuff that their engineers do. We do spend a lot of money and we’re very conscious about it and as you’ve seen when things aren’t going well we stop those investments and we put more investment into other things. And we put a lot more investment into CRI and to MID, so the memory, the core parts of the business, and we’ve reduced it elsewhere. So, while overall it looks flat it in fact we’re putting a lot of money into those things to develop products to serve those customers. So I’m thinking that the industry as a whole likes the patent piece approach and we certainly like it because we think that the growth and upside and to be frank it's just more fun working with customers to build great products than it is to sit down and listen to the lawyers.

The next question comes from Terrence Whelan from Citi.

Thanks for taking the question. This question is also a question on SSD licensing and specifically obviously you’re making progress, Ron, now that you’ve been there over a year with your collaboration in customers, can you just provide us some anecdotes in how the direct interphase and how your approach interfacing customers is changing just so we can kind of qualitatively understand the progress anecdotally? Thank you.

Terence, can you just explain that again a little bit, are you talking about -- you mentioned SSD, are you talking about non-volatile or you talking about generally?

I’m talking what’s SSD licensees you’ve mentioned half of the market is non-licensed, can you just provide us some anecdotes to give us feedback on how the progress interaction is going with the companies for example are you meeting some of these some high level discussions and at what level with these potential licensees, how is progress going in terms of you introducing your design services group with the customers?

Yes there is a few different pieces to that, again actually in question. So, I would say a lot of the discussions with the broader semiconductor industry were held up as people were trying to figure out what was happening on the DRAM side. So as we have systematically started to settle those matters we’ve had more uptake with respect to the SSD side. Every of the big customers that you can imagine, of course very small startups tend not to be our focus, were engaged with more having very open discussions at all sorts of levels and I would say they are in general very positive that people see the results in the marketplace what we’re doing. I don’t think anybody has ever thought that our technology is not absolutely superb. So the engagements are going fine, I think it’s really the proof points. And from Satish’s forecasts as you see we’re planning on settling and licensing a boarder set of the industry. So those things are really I would say that is on track as we possibly can make them. One of the things that we did differently as well as while you don’t see a lot of expense growth we’ve hired a lot of professional sales people if the group called the enterprise solutions sales, that calls very directly on all of the large accounts and it also takes an ecosystemic approach as well, so we spent a lot of time working with the customers figuring out where their customers are going and trying to develop the optimum solution, so we have a much more robust process in place today than we did even a year ago.

And then perhaps as a follow up to that, obviously you have some 2015 SSE renewals ahead of you. As I think about 2014 will some of the growth be driven by expanding existing interactions as opposed to new licensees or will it primarily be driven by new licensee growth, thanks.

Well, it's going to be both, we certainly have existing licensees that we intend to do more with and we have new licensees that are targeted and we're very proactively in those negotiations and discussions as we speak.

And then my last one Ron is we saw the Samsung agreement one full year ahead of the expiry date of the pre-existing contract, you know does this suggest that you’re more open to renewing earlier rather than later in your future renewals as well or is this independent? Thanks.

That was more independent but I think people are looking at this space and seeing that we’re a reasonable party to deal with. As I said when people -- when you knock on their door and they pretend they’re not home, that’s rather difficult to have the meetings, now we don’t have that problem they welcome us in and so we may get things signed earlier, it’s not really a strategy of ours by any means. In that particular case you know Samsung was very willing to discuss things and we collectively seen more opportunity that the only way we can get to the more opportunity was to settle and make sure we had a stable relationship going forward, that’s settled too, to renew, make sure is a stable relationship.

[Operator Instructions]. The next question comes from Sandeep Vajekar from Jefferies.

Hi guys, thanks for taking the question and thanks also for providing a segment level detail to support your guidance for 2014 very helpful. I had just a couple of questions related with guidance. So given that the DRAM portion of royalties is relatively well known, could you help us understand roughly what portion of the SOC and new business growth that you’re guiding for is likely to be generated by the variable component of royalties from existing customers versus royalties from new customers that Rambus expects to license in 2014.

Yes Sandeep that’s going to be very difficult because some of our SOCs are variable, some of them are fixed. So I think the best way for us to describe this was to really talk about the DRAM and then given that DRAM numbers are fairly well known, everything other than that is going to be a combination of SOC licensing, could be from CRI, could be from MID, could be a combination of some solution licensing where we are talking to some customers and there may be an NRE as it engages to recognize those revenue and could also include some product sales from LDTs. So it's a combination of non-DRAM that’s driving the topline growth that we are aware of. I can’t break it any further into SOCs because in the past what we tried to do was it was simpler model where we had MID and MID had DRAM and SOCs but we shouldn’t forget that CRI also, many of their customers are SOC customers. And now we have an overlap of customers like SD MICRO is an overlap, Samsung is an overlap, so trying to discern how much is coming from SOC that’s related to CRI and how much is from MID is going to very-very difficult as we move to the hybrid model.

Okay, understand, Satish just a quick follow-up on CRI, clearly there was a nice step up in CRI revenues in the fourth quarter, I understand that some of it is the way you’re doing allocations but behind that I guess, is there a way you can help us understand what drove the uptick and more interestingly what assumptions we might make about the quarterly profile of CRI revenues in 2014.

You’re right; the allocation did help CRI to come in about $34 million in and CLI for the full year about 12% of CLI for the full year. You know going forward the assumption that we have built into the model is that there will be additional longer term customers that will be signed and as we mentioned in the past CRI’s model is more longer term but we have built in signing additional design wins that they have with their technologies both in the CryptoFirewall side and also signings from DPA customers. So combination of selling through cores as well as from patent licensing, those assumptions are built into the growth of CRI. So if you look at the numbers obviously CRI on a percent basis should be growing the fastest of all three business units.

Okay that’s very helpful and then last one from me can you just talk in general about any differences that we should be aware of between license agreements with memory suppliers and license agreements with SOC suppliers.

Generally the structure is very similar, the patent licenses are term licenses, typically in the past they have been five years. We've had a combination of fixed payments; we've also had variable payments based on the number of units shipped. So they've been mirror what we had with the memory division in the past. I think the only slight difference I would say that with some of them even though we call them fixed their payments are not the same every year over the five year period, some of them they have some sort of a scaling down over time, they might pay us tax this year, divide it by four every quarter but next year they might be paying us something less than x, but it’s spread over four years, so that is something which we expect to fill that hole with growth from new SOC licensing.

Next question comes from Terence Whalen from Citi.

Great thank you. It’s a pretty simple follow up for Satish. Satish we just wanted to get your understanding of how the debt will be handled and how interest expense specifically will be divided up in the March and June quarter just for us to precisely model that, thanks.

Sure, so for like from a cash perspective we’ll be paying approximately -- well not approximately but 5% on 172.5 for six months in the first half, so that’s around $4.5 million and then we’ll be paying [indiscernible] on the 138 million. So those are all the cash portions of it. In our numbers we also -- the way our balance sheet is record the leads we have, we are assumed to own the property that we are in even though we don’t own it, so there is a cash component about $4.5 million for this [indiscernible] facility that also shows up in the interest expense and the pro-forma as well as in the GAAP numbers. So if you want to know what to expect in terms of the non-cash portion for interest expense in the first half, let me just pull that out for a second. The cash portion on the coupons in total for the notes should be -- the total investment expense should be about 6.2 to 6.3 in Q1 and Q2.

Okay, terrific. And then my last question has to do with given the comments that you made on the lighting business. Does that affect your attitudes or approach to how you are thinking about M&A over the next year? Thank you.

Well I am not sure the lighting business per se affects it, we look at it in a very strategic and opportunistic way. Clearly from an acquisition standpoint the core of the business which is the memory high speed links and security part, cryptography part, that’s our focus for acquiring assets because we really want to put more wood behind that era. We’re happy with the lighting business, we spent a lot of time -- I have spent a lot time with the customers over the last several months and I think we have tuned it to have a profitable growth, we’re just very tempered in our view of the growth for the reasons that we described, we’re working as hard as we possibly can with the customers to get out from in front of some of the suppliers to them and minimize the amount of manufacturing that we have to do, still recognizing that it’s an important element to be able to bring up their systems. So I think that business standalone is going to be even stronger than it was and clearly from a financial standpoint it is much less of a drain, it’s no drain as long as we execute to what we wanted to. And who knows there can very substantial upside because as these customers start to transition to ship more of our products we do have a very healthy royalty rate that comes from them.

Let me just correct myself, I think I gave you the 2013 numbers, so even in Q2 for the total interest expense would be about 8.7 and 7.6 in the first half, first two quarters and then going down to about 2 million a quarter.

I am showing no further questions. I'd now like to turn the call back over to Ron Black for closing remarks.

Thank you all for your continued interest and support. We’re very pleased with the results for 2013 and feel that we’re especially well positioned for growth in 2014. Have a great rest of your day.

Ladies and gentlemen that does conclude the conference for today. Again thank you for your participation. You may all disconnect. Have a good day.