Rambus Inc – IPO: ‘424B4’ on 5/14/97

As of:  Wednesday, 5/14/97   ·   Accession #:  950109-97-4098   ·   File #:  333-22885

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                            91    545K 

Document Table of Contents

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                                              Filed Pursuant to Rule 424(b)(4)
                                                    Registration No. 333-22885

PROSPECTUS                                                                      

2,750,000 Shares  

[LOGO OF RAMBUS INC.] 

RAMBUS INC. 
COMMON STOCK  

----------------  

ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. 
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF 
THE COMPANY. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN   
DETERMINING THE INITIAL PUBLIC OFFERING PRICE. THE SHARES OF COMMON STOCK       
OFFERED HEREBY HAVE BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET   
UNDER THE SYMBOL "RMBS."                                                        

----------------  

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON  
PAGE 5 HEREOF.                                                                  

----------------  

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES   
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE      
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.                                                               

----------------  

PRICE $12 A SHARE 

----------------  

                                                                [Download Table]

                                                       UNDERWRITING             
                                           PRICE TO   DISCOUNTS AND  PROCEEDS TO
                                            PUBLIC    COMMISSIONS(1) COMPANY(2) 
                                           --------   -------------- -----------
                                                                                
Per Share................................   $12.00         $.84        $11.16   
Total(3)................................. $33,000,000   $2,310,000   $30,690,000

--------                                                                        
(1) The Company has agreed to indemnify the Underwriters against certain    
   liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."                                        
 (2) Before deducting expenses payable by the Company estimated at $1,100,000.
(3) The Company has granted the Underwriters an option, exercisable within  
 30 days of the date hereof, to purchase up to an aggregate of 412,500
    additional Shares at the price to public less underwriting discounts and
   commissions for the purpose of covering over-allotments, if any. If the
 Underwriters exercise such option in full, the total price to public,
  underwriting discounts and commissions and proceeds to Company will be
$37,950,000, $2,656,500 and $35,293,500, respectively. See          
"Underwriters."                                                     

----------------  

The Shares are offered, subject to prior sale, when, as and if accepted by  
the Underwriters named herein and subject to approval of certain legal matters  
by Fenwick & West LLP, counsel for the Underwriters. It is expected that        
delivery of the Shares will be made on or about May 19, 1997, at the office of  
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in  
immediately available funds.                                                    

----------------  

MORGAN STANLEY & CO.                                                            
Incorporated                                                            
HAMBRECHT & QUIST       
                                                 ROBERTSON, STEPHENS & COMPANY

May 13, 1997                                                                    

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY        
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN  
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS     
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY         
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A         
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED       
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY        
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE         
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER   
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO   
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE          
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE   
HEREOF.                                                                         

----------------  

UNTIL JUNE 7, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL   
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT     
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.    
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO        
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR      
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.                                             

----------------  

TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]

                                      PAGE                                       PAGE
                                      ----                                       ----
                                                                                     
Prospectus Summary..................    3   Business............................  29 
The Company.........................    4   Management..........................  43 
Risk Factors........................    5   Certain Transactions................  52 
Use of Proceeds.....................   15   Principal Stockholders..............  55 
Dividend Policy.....................   15   Description of Capital Stock........  58 
Capitalization......................   16   Shares Eligible for Future Sale.....  64 
Dilution............................   17   Underwriters........................  66 
Selected Consolidated Financial             Legal Matters.......................  68 
 Data...............................   18   Experts.............................  68 
Management's Discussion and Analysis        Additional Information..............  68 
 of Financial Condition and Results         Index to Consolidated Financial          
 of Operations......................   19    Statements......................... F-1 

----------------  

The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by its independent auditors and       
quarterly reports containing unaudited consolidated financial data for the      
first three quarters of each fiscal year.                                       

----------------  

RDRAM and the Rambus logo are registered trademarks, and Rambus, RAC, Rambus
Channel, RModule and RSocket are trademarks of the Company. This Prospectus     
also includes product names and other trade names and trademarks of the         
Company and of other organizations.                                             

----------------  

Unless otherwise indicated, the information in this Prospectus: (i) gives   
effect to the conversion of all outstanding shares of Preferred Stock into      
shares of Common Stock upon completion of this offering and (ii) does not give  
effect to exercise of the Underwriters' over-allotment option.                  

----------------  

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS   
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.     
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,   
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR   
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."                          

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Left side of gatefold, insider cover page:                                      
------------------------------------------                                      

left half of page:   caption - "Since 1980, the typical operating frequency of  
Intel and other mainstream microprocessors has increased approximately 40 times 
from 5 MHz (million cycles per second) to 200 MHz.  During this same period, the
typical operating frequency of DRAMs has only increased by approximately ten    
times.  This growing disparity between the frequency of microprocessors and     
DRAMs is termed the "Performance Gap."                                          

right half of page:                                                             

Heading - "Traditional DRAM Memory System"                      

       diagram showing  Processor/Controller connecting to multiple DRAMs with
individual connections.                                         

     caption - "Conventional memory systems have addressed the Performance
        Gap using a "wide bus" approach. This approach uses many DRAM components
  in a wide, parallel bus and requires many connections to the logic
      integrated circuits. While this can increase memory bandwidth, it also
        results in complex circuit boards and costly systems. In addition, there
     is a limit to which the bandwidth can be increased due to the limited
number of connections available on the integrated circuit."     

Heading - "Rambus Solution"                                     

       diagram showing Processor/Controller connecting to multiple RDRAMs with
a single connection.                                            

    caption - "Rambus has created a revolutionary chip-to-chip interface
     architecture which allows data to be transferred through a simplified
    bus at significantly higher frequencies - 600 megabytes per second -
      than permitted by conventional technologies. System performance can be
    further enhanced by applying Rambus interface technology to multiple
       channels on a logic integrated circuit. The result is greatly increased
memory bandwidth and reduced costs."                            

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Right side of gatefold, insider cover page:                                     
-------------------------------------------                                     

Heading - "Selected RDRAM licensees, Rambus logic IC licensees and systems      
companies that have adopted Rambus technology"                                  

artwork consists of Company logos -                                   

LSI Logic             Toshiba      LG Semicon                                   

Cirrus Logic          MoSys        Hyundai                                      

Creative Labs         Nintendo                                        

SGS Thomson           Oki      Chromatic Research                               

Samsung               Silicon Graphics                                

Mitsubishi            NEC      Hitachi                                          

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed     
information and the Consolidated Financial Statements and Notes thereto         
appearing elsewhere in this Prospectus.                                         

THE COMPANY 

Rambus Inc. ("Rambus" or the "Company") designs, develops, licenses and     
markets high-speed chip-to-chip interface technology to enhance the performance 
and cost-effectiveness of consumer electronics, computer systems and other      
electronic systems. The Company licenses semiconductor companies to manufacture 
and sell memory and logic ICs incorporating Rambus interface technology and     
markets its solution to systems companies to encourage them to design Rambus    
interface technology into their products. The Company's technology cost-        
effectively increases the data transfer rate or "memory bandwidth," allowing    
semiconductor memory devices to keep pace with faster generations of processors 
and controllers, and thus supports the accelerating data transfer requirements  
of multimedia and other high-bandwidth applications.                            

The high-speed interface technology Rambus has developed is applicable to   
data transfer between most semiconductor chips. The Company has initially       
chosen to concentrate the application of its technology on the interface        
between logic ICs and memory devices because of the acute performance needs and 
the relevant market sizes. The Company believes that the systems which will     
best utilize the high bandwidth provided by current Rambus technology are the   
relatively high-volume, low-cost systems in which the cost of the memory        
subsystems represents a significant portion of the selling price. To date, the  
principal applications for the Company's technology have been in the consumer   
multimedia, PC multimedia and workstation multimedia markets. These areas       
accounted for the sale of approximately $13,000, $11 million and $447 million   
of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996,              
respectively. Although period-to-period changes in the Company's revenues are   
dependent upon numerous factors other than changes in sales of Rambus ICs, the  
Company believes that increases in sales of Rambus ICs are an indication of the 
level of market acceptance of the Company's technology to date. Systems         
companies utilizing Rambus technology in these multimedia markets include       
Nintendo, Silicon Graphics, Chromatic Research and Creative Labs. The Company's 
licensees include Cirrus Logic, Hitachi, Hyundai Electronics, IBM, LG Semicon,  
LSI Logic, Micron Technology, Mitsubishi, NEC, Oki Electric Industry, Samsung   
Electronics, SGS-THOMSON and Toshiba, which in the aggregate accounted for      
approximately 83% of the Company's revenues in the first half of fiscal 1997.   
Other applications currently being developed for Rambus technology include      
multifunction peripheral controllers for combination fax/copier/scanner/laser   
printer devices, and networking equipment such as high-speed ethernet switches. 
In addition, the Company and Intel Corporation have entered into a development  
and license agreement and are working together to develop an extension of the   
Rambus interface technology optimized for the PC main memory market segment.    

THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                                             
Common Stock offered....................................... 2,750,000 shares                                 
Common Stock to be outstanding after the offering.......... 21,453,651 shares(1)                             
Use of proceeds............................................ For general corporate purposes, including working
                                                            capital and capital expenditures                 
Nasdaq National Market symbol.............................. RMBS                                             

SUMMARY CONSOLIDATED FINANCIAL DATA 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                       SIX MONTHS ENDED  
                                 YEAR ENDED SEPTEMBER 30,                  MARCH 31,     
                          -------------------------------------------  ------------------
                           1992     1993     1994     1995     1996      1996      1997  
                          -------  -------  -------  -------  -------  --------  --------
                                                                                         
                                                                          (UNAUDITED)    
CONSOLIDATED STATEMENTS                                                                  
OF OPERATIONS DATA:                                                                      
Total revenues..........  $ 1,916  $ 3,371  $ 5,000  $ 7,364  $11,270  $  5,072  $ 11,425
Total costs and                                                                          
 expenses...............    7,663    9,333   11,197   13,417   15,838     7,328    10,909
Operating income                                                                         
 (loss).................   (5,747)  (5,962)  (6,197)  (6,053)  (4,568)   (2,256)      516
Net income (loss).......   (6,594)  (6,336)  (6,629)  (7,020)  (4,415)   (2,235)      388
Net income (loss) per                                                                    
 share(2)...............  $ (2.24) $ (1.44) $ (1.29) $ (1.24) $ (0.73) $  (0.37) $   0.02
Shares used in per share                                                                 
 calculations(2)........    2,945    4,394    5,124    5,665    6,088     6,047    20,083

                                                        [Enlarge/Download Table]

                                                                          MARCH 31, 1997     
                                                                     ------------------------
                                                                      ACTUAL   AS ADJUSTED(3)
                                                                     --------  --------------
                                                                                             
                                                                           (UNAUDITED)       
CONSOLIDATED BALANCE                                                                         
SHEET DATA:                                                                                  
Cash, cash equivalents and marketable securities.................... $ 10,492     $40,082    
Total assets........................................................   23,843      53,433    
Total debt(4).......................................................      847         847    
Stockholders' equity (deficit)......................................  (11,065)     18,525    

-------                                                                         
(1) Based on the number of shares of Common Stock outstanding as of March 31,   
  1997. Excludes 2,174,470 shares of Common Stock issuable upon the exercise
of options outstanding under the Company's 1990 Stock Plan at March 31, 
1997, with a weighted average exercise price of $2.70 per share, and    
246,500 shares of Common Stock issuable upon the exercise of options    
 granted under the Company's 1990 Stock Plan subsequent to March 31, 1997,
with a weighted average exercise price of $8.00 per share. Also excludes
(i) 1,000,000 shares of Common Stock reserved for issuance under the    
   Company's 1997 Stock Plan, (ii) 400,000 shares of Common Stock reserved for
issuance under the Company's 1997 Employee Stock Purchase Plan and (iii)
 1,000,000 shares of Common Stock issuable upon exercise of an outstanding
warrant at an exercise price of $10.00 per share. See "Capitalization," 
"Management--Stock Plans" and Notes 10 and 17 of Notes to Consolidated  
Financial Statements.                                                   
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation 
  of the determination of net income (loss) per share and the shares used in
 per share calculations. The pro forma net income (loss) per share for the
 year ended September 30, 1996 and the six months ended March 31, 1997 was
$(0.25) and $0.02, respectively. The pro forma shares used in per share 
   calculations for the year ended September 30, 1996 and the six months ended
March 31, 1997 were 17,385 and 20,083, respectively.                    
(3) Adjusted to reflect the sale by the Company of 2,750,000 shares of Common   
   Stock offered hereby after deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company. See "Use of     
Proceeds" and "Capitalization."                                         
(4) Total debt consists of indebtedness for capital lease obligations.          

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THE COMPANY 

Rambus designs, develops, licenses and markets high-speed chip-to-chip      
interface technology to enhance the performance and cost-effectiveness of       
consumer electronics, computer systems and other electronic systems. The        
Company licenses semiconductor companies to manufacture and sell memory and     
logic ICs incorporating Rambus interface technology and markets its solution    
to systems companies to encourage them to design Rambus interface technology    
into their products. The Company's technology cost-effectively increases the    
data transfer rate, or "memory bandwidth," allowing semiconductor memory        
devices to keep pace with faster generations of processors and controllers and  
thus supports the accelerating data transfer requirements of multimedia and     
other high-bandwidth applications.                                              

The performance of a computer or other electronic system is typically       
constrained by the speed of its slowest element. In the past, that element was  
the logic IC that controlled the system's specific functions and performed      
calculations--the microprocessor. In recent years, however, new generations of  
microprocessors have become substantially faster and more powerful, and         
increasingly the bottleneck in system performance is becoming the component     
that stores the instructions and data needed by the microprocessor--the DRAM.   
Since 1980, the typical operating frequency of Intel and other mainstream       
microprocessors has increased approximately 40 times from 5 MHz (million        
cycles per second) to 200 MHz. During this same period, the typical operating   
frequency of DRAMs has increased by approximately ten times. This growing       
disparity between the frequency of microprocessors and DRAMs is termed the      
"Performance Gap."                                                              

Rambus has created a revolutionary chip-to-chip interface architecture,     
which allows data to be transferred through a simplified bus at significantly   
higher frequencies than permitted by conventional technologies. Rambus has      
focused the application of its interface technology on the Performance Gap and  
licenses its interface technology to memory and logic semiconductor             
manufacturers, which incorporate this interface technology into their IC        
designs to supply systems companies with Rambus ICs. The key elements of the    
Rambus interface are Rambus-based DRAMs ("RDRAMs"), Rambus ASIC cells ("RACs")  
and the interconnecting circuitry known as the "Rambus Channel." While Rambus   
technology can be used to address a wide variety of chip-to-chip data transfer  
requirements, the largest immediate application is to connect logic circuits    
to memory in home video games, PCs, workstations and other electronic systems.  

To date, the principal applications for the Company's technology have been  
in the consumer multimedia, PC multimedia and workstation multimedia markets.   
These areas accounted for the sale of approximately $13,000, $11 million and    
$447 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and       
1996, respectively. Although period-to-period changes in the Company's          
revenues are dependent upon numerous factors other than changes in sales of     
Rambus ICs, such as the structure of royalty arrangements with particular       
licensees, the level of prepaid royalties to be offset, the mix of royalty-     
bearing sales between RDRAMs and RACs and the one quarter lag time between      
sales by licensees and the receipt of royalties by the Company, the Company     
believes that increases in sales of Rambus ICs indicate the level of market     
acceptance of the Company's technology to date. Systems companies utilizing     
Rambus technology in the consumer multimedia, PC multimedia and workstation     
multimedia markets include Nintendo, Silicon Graphics, Chromatic Research and   
Creative Labs. The Company's licensees include Cirrus Logic, Hitachi, Hyundai   
Electronics, IBM, LG Semicon, LSI Logic, Micron Technology, Mitsubishi, NEC,    
Oki Electric Industry, Samsung Electronics, SGS-THOMSON and Toshiba, which in   
the aggregate accounted for approximately 83% of the Company's revenues in the  
first half of fiscal 1997. Other applications currently being developed for     
Rambus technology include multifunction peripheral controllers for combination  
fax/copier/scanner/laser printer devices, and networking equipment such as      
high-speed ethernet switches. In addition, the Company and Intel Corporation    
have entered into a development and license agreement and are working together  
to develop an extension of the Rambus interface technology optimized for the    
PC main memory market segment.                                                  

The Company was incorporated in California in March 1990 and reincorporated 
in Delaware in March 1997. The Company's principal executive offices are        
located at 2465 Latham Street, Mountain View, CA 94040. Its telephone number    
is (415) 903-3800. The Company's home page can be located on the Internet at    
http://www.rambus.com. Information contained on the Company's Web site does     
not constitute part of this Prospectus.                                         

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RISK FACTORS  

In addition to the other information in this Prospectus, the following      
factors should be considered carefully in evaluating an investment in the       
shares of Common Stock offered hereby. This Prospectus contains forward-        
looking statements that involve risks and uncertainties. The Company's actual   
results may differ materially from the results discussed in such forward-       
looking statements. Factors that may cause such a difference include, but are   
not limited to, those discussed below and in the section entitled               
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

Unpredictable and Fluctuating Operating Results. Because many of the        
Company's revenue components fluctuate and are difficult to predict, and its    
expenses are largely independent of revenues in any particular period, it is    
difficult for the Company to accurately forecast revenues and profits or        
losses. Historically, contract revenues have represented the largest portion    
of the Company's revenues. The Company recognizes contract revenues ratably     
over the period during which post-contract customer support is expected to be   
provided. While this means that contract revenues from current licenses are     
relatively predictable, accurate prediction of revenues from new licenses is    
difficult because the development of a business relationship with a potential   
licensee is a lengthy process, frequently spanning a year or more, and the      
fiscal period in which a new license agreement will be entered into, if at      
all, and the financial terms of such an agreement are difficult to predict. In  
addition to license fees, contract revenues include fees for engineering        
services, which are dependent upon the varying level of assistance desired by   
licensees and, therefore, the revenue from these services is also difficult to  
predict. Adding to the complexity of making accurate financial forecasts is     
the fact that certain expenses associated with a particular contract are        
typically front-end loaded, except for expenses associated with upgrades and    
enhancements, whereas contract fees associated with that contract are           
recognized ratably over the period during which the post-contract customer      
support is expected to be provided.                                             

Royalties accounted for 25.9% of total revenues in the first half of fiscal 
1997. While the Company does not expect a significant increase in royalty       
revenue in the near term, the Company believes that royalties will represent    
an increasing portion of total revenue in the long term. Increasing royalty     
revenues will add to the difficulty in making accurate financial forecasts.     
Such royalties (other than nonrefundable prepaid royalties) are recognized in   
the quarter in which the Company receives a report from a licensee regarding    
the shipment of Rambus ICs in the prior quarter, and are dependent upon         
fluctuating sales volumes and prices of chips containing Rambus technology,     
all of which are beyond the Company's ability to control or assess in advance.  
A few contracts include nonrefundable prepaid royalties, which are recognized   
ratably over the period during which post-contract customer support is          
expected to be provided, and are not related to the actual rate at which        
Rambus ICs are shipped by the licensee. Accordingly, the amount of              
nonrefundable, prepaid royalties recognized in a period is not necessarily      
representative of the rate at which the nonrefundable, prepaid royalties are    
being offset by royalties earned on shipments made. The Company believes that   
its continued success will be substantially dependent upon royalties            
increasing at a rate which more than offsets decreases in the recognition of    
deferred revenue under existing contracts as their recognition periods expire,  
as well as the Company's ability to add new licensees and to license new        
generations of its technology to its existing licensees. Because a systems      
company can change its source of Rambus ICs at any time, and because the new    
Rambus license source could have a considerable nonrefundable prepaid royalty   
balance as well as different royalty rates, any such change by a systems        
company, particularly one which accounts for substantial volumes of Rambus      
ICs, could have a sudden and significant adverse effect on the Company's        
revenues.                                                                       

The Company's business is subject to a variety of additional risks that     
could materially adversely affect quarterly and annual operating results,       
including market acceptance of the Company's technology; systems companies'     
acceptance of Rambus ICs produced by the Company's licensees; market            
acceptance of the products of systems companies which have adopted the          
Company's technology; the loss of any strategic relationships with systems      
companies or licensees; announcements or introductions of new technologies or   
products by the Company or the Company's competitors; delays or problems in     
the introduction or performance of enhancements or future generations of the    
Company's technology; fluctuations in the market price and demand for DRAMs     
and logic ICs into which the Company's technology has been incorporated;        
competitive pressures resulting in                                              

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lower contract revenues or royalty rates; changes in the Company's and system   
companies' development schedules and levels of expenditure on research and      
development; personnel changes, particularly those involving engineering and    
technical personnel; costs associated with protecting the Company's             
intellectual property; changes in Company strategies; foreign exchange rate     
fluctuations or other changes in the international business climate; and        
general economic trends and other factors.                                      

The Company has granted to Intel Corporation a warrant for the purchase of  
1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The  
warrant will become exercisable only upon the achievement of certain            
milestones, resulting in a charge to the statement of operations at the time    
of achievement of the milestones based on the fair value of the warrant.        

In future quarters, the Company's operating results may not meet the        
expectations of public market analysts or investors. In such an event, the      
market price of the Common Stock would be materially adversely affected. See    
"--Dependence upon Limited Number of Licensees," "--Dependence upon Systems     
Companies," "--No Assurance of Adoption of Rambus Technology as an Industry     
Standard" and "Management's Discussion and Analysis of Financial Condition and  
Results of Operations."                                                         

History of Losses; No Assurance of Profitability. As of March 31, 1997, the 
Company's accumulated deficit was approximately $34.1 million. While the        
Company generated net income for the first time in the quarter ended December   
31, 1996, it incurred significant losses in each quarter of fiscal 1996 and in  
each quarter of its prior fiscal years. There can be no assurance that in the   
future the Company will be profitable on a quarterly or annual basis. See       
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

Dependence upon Limited Number of Licensees. The Company neither            
manufactures nor sells devices containing its interface technology. Rather,     
the Company licenses its technology to semiconductor companies which in turn    
manufacture and sell Rambus ICs to systems companies which incorporate Rambus   
technology into their products. The Company's strategy to become an industry    
standard is dependent upon the Company's ability to make its technology widely  
available to systems companies through multiple semiconductor manufacturers,    
and there can be no assurance that the Company will be successful in            
maintaining its relationships with its current licensees or in entering into    
new relationships with additional licensees. The Company faces numerous risks   
in successfully obtaining licensees on terms consistent with the Company's      
business model, including, among others, the lengthy and expensive process of   
building a relationship with a potential licensee before there is any           
assurance of a license agreement with such party; persuading large              
semiconductor companies to work with, to rely for critical technology on, and   
to disclose proprietary manufacturing technology to, a smaller company such as  
Rambus; persuading potential licensees to bear certain development costs        
associated with Rambus technology and to make the necessary investment to       
successfully produce Rambus ICs; and successfully transferring technical know-  
how to licensees. In addition, there are a relatively limited number of larger  
semiconductor companies to which the Company could license its interface        
technology in a manner consistent with its business model. The Company          
believes that its principal competition may come from its licensees and         
prospective licensees, many of which are evaluating and developing products     
based on alternative technologies. See "--Competition" and "Business--Rambus    
Licensees."                                                                     

Dependence upon Systems Companies. Although sales of Rambus ICs to systems  
companies which have adopted the Company's technology for their products are    
not made directly by the Company, such sales directly affect the amount of      
royalties received by the Company. Therefore, the Company's success is          
substantially dependent upon the adoption of the Company's interface            
technology by systems companies, particularly those which develop and market    
high-volume business and consumer products such as home video games and PCs.    
The Company is subject to many risks beyond its control that influence the      
success or failure of a particular systems company, including among others      
competition faced by the systems company in its particular industry; market     
acceptance of the systems company's products; the engineering, sales and        
marketing and management capabilities of the systems company; technical         
challenges unrelated to Rambus technology faced by the systems company in       
developing its products; and the financial and other resources of the systems   
company. The process                                                            

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of persuading systems companies to adopt the Company's technology can be        
lengthy and, even if adopted, there can be no assurance that the Rambus         
technology will be used in a product that is ultimately brought to market,      
achieves commercial acceptance or results in significant royalties to the       
Company. Rambus must dedicate substantial resources to market to and support    
systems companies, in addition to supporting the sales and marketing and        
technical efforts of its licensees in promoting Rambus technology to systems    
companies. To date, the Company has not charged systems companies for           
technical support. Because the Company does not control the business practices  
of its licensees, it has no ability to establish the prices at which its        
technology is made available to systems companies or the degree to which its    
licensees promote Rambus technology to systems companies. See "Business--The    
Rambus Solution," "--Target Markets and Applications" and "--Rambus Business    
Model and Strategy."                                                            

No Assurance of Adoption of Rambus Technology as an Industry Standard. An   
important part of the Company's strategy to become an industry standard is to   
penetrate new markets by targeting leaders in those markets. This strategy is   
designed to encourage other participants in those markets to follow such        
leaders in adopting Rambus technology. Should a high profile industry           
participant adopt Rambus technology for one or more of its products but fail    
to achieve success with those products, other industry participants'            
perception of Rambus technology could be adversely affected. Any such event     
could reduce future sales of Rambus ICs. Likewise, were a market leader to      
adopt and achieve success with a competing technology, the Company's            
reputation and sales could be adversely affected. In addition, some industry    
participants have adopted, and others may in the future adopt, a strategy of    
disparaging the Rambus solution adopted by their competitors. Failure of the    
Company's technology to be adopted as an industry standard would have a         
material adverse effect on the Company's business, financial condition and      
results of operations. See "--Competition", "Business--Target Markets and       
Applications" and "--Competition."                                              

Future Dependence upon PC Main Memory Market Segment and Intel. An important
part of the Company's strategy is to penetrate the market segment for PC main   
memory. Rambus believes that PC main memory currently accounts for              
approximately one-half of all DRAMs sold. In November 1996, Rambus signed a     
development and license contract with Intel Corporation which provides for the  
parties to cooperate in the development of a specification for an extension of  
the RDRAM optimized for PC main memory applications. The contract also calls    
for Intel to use reasonable best efforts to develop a PC main memory            
controller designed for use with such RDRAMs. The anticipated development       
period for the new RDRAM technology is at least two years and there are a       
number of technological issues which must be successfully resolved prior to     
implementation. There can be no assurance that Intel will successfully develop  
a controller for use with RDRAMs in time to meet market requirements, or at     
all. Under the contract, Intel can terminate its relationship with Rambus at    
any time. Even if such development efforts are completed, there is no           
assurance that RDRAMs will be built by the Company's licensees and purchased    
by PC manufacturers in sufficient quantity to become a standard for PC main     
memory. The Company established a relationship with Intel several years ago,    
but Intel did not at that time pursue development relating to Rambus            
technology. There can be no assurance that Intel's current emphasis or          
priorities will not change in the future, resulting in less attention and       
fewer resources being devoted to the current Rambus relationship. Although      
certain aspects of the current relationship between the two companies are       
contractual in nature, many important aspects depend on the continued           
cooperation of the two companies. There can be no assurance that Rambus and     
Intel will be able to work together successfully over an extended period of     
time. In addition, there can be no assurance that Intel will not develop or     
adopt competing technologies in the future. See "Business--Target Markets and   
Applications--PC Main Memory" and "--Rambus Business Model and Strategy."       

Revenue Concentration. The Company is subject to revenue concentration risks
at both the licensee and the systems company levels. In fiscal 1994, 1995 and   
1996 and the first half of fiscal 1997, revenues from the Company's top five    
licensees accounted for approximately 86%, 70%, 65% and 70% of the Company's    
revenues, respectively. In the first half of fiscal 1997, NEC accounted for     
approximately 32% of revenues and LG Semiconductor accounted for approximately  
11% of revenues. Because the revenues derived from various licensees vary from  
period to period depending on the addition of new contracts, the expiration of  
deferred                                                                        

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revenue schedules under existing contracts and the volumes and prices at which  
the licensees have recently sold Rambus ICs to systems companies, the           
particular licensees which account for revenue concentration have varied from   
period to period. These variations are expected to continue in the foreseeable  
future although the Company anticipates that revenue will continue to be        
concentrated in a limited number of licensees.                                  

The royalties received by the Company are a function of the adoption of     
Rambus technology at the systems company level. Systems companies purchase      
semiconductors containing Rambus technology from Rambus licensees, and          
generally do not have a direct contractual relationship with the Company. The   
Company's licensees generally do not provide detail as to the identity of, or   
volume of Rambus ICs purchased by, particular systems companies. As a result,   
the Company faces difficulty in analyzing the extent to which its future        
revenues will be dependent upon particular systems companies.                   

The profitability first attained by the Company in the quarter ended        
December 31, 1996 and sustained in the quarter ended March 31, 1997 was         
attributable primarily to an increase in royalties from NEC, which the Company  
believes was largely due to royalties on Rambus technology incorporated into    
the Nintendo 64 video game system. For reasons described in the foregoing       
paragraph, the Company cannot precisely quantify this amount, because its       
licensees generally are not required to identify the particular products that   
incorporate, or the particular systems companies which purchase, Rambus ICs.    
The Company anticipates that sales from its licensees to Nintendo will          
continue to account for a substantial portion of royalties in fiscal 1997.      
Nintendo faces intense competitive pressure in the video game market, which is  
characterized by extreme volatility, frequent new product introductions and     
rapidly shifting consumer preferences, and there can be no assurance as to the  
unit volumes of Rambus ICs that will be purchased by Nintendo in the future or  
the level of royalty-bearing revenues that the Company's licensees will         
receive from Nintendo.                                                          

The Company believes its potential to generate royalties in fiscal 1997 is  
largely dependent on system sales by Nintendo and sales of multimedia           
controller chips by Cirrus Logic and Chromatic. None of these companies is      
under any obligation to continue using Rambus technology in its current         
product or to incorporate Rambus technology into its future products. There     
can be no assurance that a significant number of other systems companies will   
adopt the Company's technology or that the Company's dependence upon            
particular systems companies will decrease in the future. See "--Unpredictable  
and Fluctuating Operating Results," "--Dependence upon Limited Number of        
Licensees," "--Dependence upon Systems Companies," "--No Assurance of Adoption  
of Rambus Technology as an Industry Standard," "Management's Discussion and     
Analysis of Financial Condition and Results of Operations" and "Business--      
Rambus Licensees."                                                              

Reliance upon DRAM Market; Declines in DRAM Price and Unit Volume per       
System. In the first half of fiscal 1997, 25.9% of the Company's revenues was   
in the form of royalties and the Company's business model assumes an            
increasing percentage of total revenues from royalties in the long term. To     
date, a majority of the Company's royalties has been derived from the sale of   
logic ICs incorporating RACs. If the Company is successful in its strategy to   
penetrate the PC main memory market, the Company expects that royalties from    
the sale of RDRAMs will eventually account for the largest portion of           
royalties. Royalties on RDRAMs are based on the volumes and prices of RDRAMs    
manufactured and sold by the Company's licensees. The royalties received by     
the Company therefore are influenced by many of the risks faced by the DRAM     
market in general, including constraints on the volumes shipped during periods  
of shortage and reduced average selling prices. The DRAM market is intensely    
competitive and generally is characterized by declining average selling prices  
over the life of a generation of chips. Such price decreases, and the           
corresponding decreases in per unit royalties received by the Company, can be   
sudden and dramatic. Compounding the effect of price decreases is the fact      
that, under certain of the Company's license agreements, royalty rates          
decrease as a function of time or volume. With the introduction of each new     
generation of higher density RDRAMs, the Company generally expects higher       
prices resulting in higher royalties per device, but with correspondingly       
fewer devices required per system. There can be no assurance that decreases in  
DRAM prices or in the Company's royalty rates will not have a material adverse  
effect on the Company's business, results of operations and financial           
condition. There can be no assurance that the Company will be successful in     
maintaining or increasing its share of any market. See "Management's            
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Rapid Technological Change; Reliance on Fundamental Technology; Importance  
of Timely New Product Development. The semiconductor industry is characterized  
by rapid technological change, with new generations of semiconductors being     
introduced periodically and with ongoing evolutionary improvements. Since       
beginning operations in 1990, the Company has derived all of its revenue from   
its interface technology and expects that this dependence on its fundamental    
technology will continue for the foreseeable future. Accordingly, broad         
acceptance of the Company's interface technology is critical to the Company's   
future success. The introduction or market acceptance of competing technology   
which renders the Company's interface technology less desirable or obsolete     
would have a rapid and material adverse effect on the Company's business,       
results of operations and financial condition. The announcement of new          
products by the Company, such as the "Direct Rambus" technology which is under  
development, could cause licensees or systems companies to delay or defer       
entering into arrangements for the use of the Company's technology, which       
could have a material adverse effect on the Company's business, financial       
condition and results of operations.                                            

The Company's operating results will depend to a significant extent on its  
ability to introduce enhancements and new generations of its interface          
technology which keep pace with other changes in the semiconductor industry     
and which achieve rapid market acceptance. The Company must continually devote  
significant engineering resources to addressing the ever-increasing need for    
memory bandwidth associated with increases in the speed of microprocessors and  
other controllers. Technical innovations of the type that will be required for  
the Company to be successful are inherently complex and require long            
development cycles, and there can be no assurance that the Company's            
development efforts will ultimately be successful. In addition, these           
innovations must be completed before changes in the semiconductor industry      
have rendered them obsolete, must be available when systems companies require   
these innovations, and must be sufficiently compelling to cause semiconductor   
manufacturers to enter into licensing arrangements with Rambus for the new      
technology. There can be no assurance that Rambus will be able to meet these    
requirements. Moreover, significant technological innovations generally         
require a substantial investment before their commercial viability can be       
determined. There can be no assurance that the Company will have the financial  
resources necessary to fund future development, that the Company's licensees    
will continue to share certain research and development costs with the Company  
as they have in the past, or that revenues from enhancements or new             
generations of the Company's technology, even if successfully developed, will   
exceed the costs of development. See "--Competition" and "Management's          
Discussion and Analysis of Financial Condition and Results of Operations,"      
"Business--Rambus Business Model and Strategy" and "--Research and              
Development."                                                                   

Competition. The semiconductor industry is intensely competitive and has    
been characterized by price erosion, rapid technological change, short product  
life cycles, cyclical market patterns and increasing foreign and domestic       
competition. Most major DRAM manufacturers are developing higher-frequency      
versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with    
RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well    
as other major DRAM manufacturers such as IBM and Texas Instruments Inc. Most   
of these companies are much larger and have better access to financial,         
certain technical and other resources than Rambus. Additional high-speed DRAMs  
have recently been introduced by other semiconductor companies for specialized  
applications.                                                                   

The Company believes that its principal competition may come from its       
licensees and prospective licensees, many of which are evaluating and           
developing products based on alternative technologies and are beginning to      
take a systems approach similar to the Company's in solving the application     
needs of systems companies. Many DRAM suppliers have indicated that they are    
developing a new technology called Double Data Rate ("DDR") SDRAMs, aimed at    
doubling the memory bandwidth from SDRAMs without increasing the clock          
frequency. In addition, a consortium including both large DRAM manufacturers    
and systems companies is promoting a specification for an alternative high-     
speed interface standard called SyncLink. To the extent that these alternative  
technologies provide comparable system performance at lower or similar cost     
than RDRAMs, or do not require the payment of comparable royalties, the         
Company's licensees and prospective licensees may adopt and promote the         
alternative technologies. There can be no assurance that the Company's future   
competition will not have a material adverse effect on the Company's business,  
results of operations and financial condition. In addition,                     

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certain semiconductor companies have recently introduced a new kind of IC       
which combines logic and DRAM on the same chip. Such chips, called "embedded    
DRAM," eliminate the need for any chip-to-chip interface and are primarily      
being used for graphics applications. Embedded DRAMs are well suited for        
applications where component space saving and power consumption are important,  
such as in the graphics subsystems of notebook PCs. There can be no assurance   
that competition from embedded DRAMs will not increase in the future. See       
"Business--Competition."                                                        

Limited Protection of Intellectual Property; Likelihood of Potential        
Litigation. The Company has an active program to protect its proprietary        
technology through the filing of patents. At March 31, 1997, the Company held   
30 United States patents on various aspects of its technology, with expiration  
dates ranging from 2010 to 2014. At March 31, 1997, the Company had             
applications for 37 United States patents pending. The Company's United States  
patents do not prevent the manufacture or sale of Rambus-based ICs abroad. At   
March 31, 1997, the Company held six foreign patents and had additional         
foreign patent applications pending in Taiwan, Korea, Japan and various other   
jurisdictions. There can be no assurance that the Company's pending United      
States or foreign patent applications or any future United States or foreign    
patent applications will be approved, that any issued patents will protect the  
Company's intellectual property or will not be challenged by third parties, or  
that the patents of others will not have an adverse effect on the Company's     
ability to do business. Furthermore, there can be no assurance that others      
will not independently develop similar or competing technology or design        
around any patents that may be issued to the Company.                           

The Company attempts to protect its trade secrets and other proprietary     
information through agreements with licensees and systems companies,            
proprietary information agreements with employees and consultants and other     
security measures. The Company also relies on trademarks and trade secret laws  
to protect its intellectual property. Despite these efforts, there can be no    
assurance that others will not gain access to the Company's trade secrets, or   
that the Company can meaningfully protect its intellectual property. In         
addition, effective trade secret protection may be unavailable or limited in    
certain foreign countries. Although the Company intends to protect its rights   
vigorously, there can be no assurance that such measures will be successful.    

Rambus believes that it is important to develop and maintain a uniform RDRAM
memory interface standard. The Company's contracts generally prevent a          
licensee from using licensee-developed patented improvements related to Rambus  
technology to block other licensees from using the improvements or requiring    
them to pay additional royalties related to their use of Rambus interface       
technology. Specifically, the contracts generally require licensees to grant    
to Rambus a royalty-free cross-license on patented licensee intellectual        
property related to the implementation of Rambus interface technology, which    
Rambus sublicenses to other licensees that have entered into similar            
arrangements. Not all licensees have granted Rambus cross-licenses, and there   
is no assurance that such a blocking arrangement will not occur in the future.  

The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. While the Company has not        
received formal notice of any infringement of the rights of any third party,    
questions of infringement in the semiconductor field involve highly technical   
and subjective analyses. Litigation may be necessary in the future to enforce   
the Company's patents and other intellectual property rights, to protect the    
Company's trade secrets, to determine the validity and scope of the             
proprietary rights of others, or to defend against claims of infringement or    
invalidity, and there can be no assurance that the Company would prevail in     
any future litigation. Any such litigation, whether or not determined in the    
Company's favor or settled by the Company, would be costly and would divert     
the efforts and attention of the Company's management and technical personnel   
from normal business operations, which would have a material adverse effect on  
the Company's business, financial condition and results of operations. Adverse  
determinations in litigation could result in the loss of the Company's          
proprietary rights, subject the Company to significant liabilities, require     
the Company to seek licenses from third parties or prevent the Company from     
licensing its technology, any of which could have a material adverse effect on  
the Company's business, financial condition and results of operations.          

In any potential dispute involving the Company's patents or other           
intellectual property, the Company's licensees could also become the target of  
litigation. While the Company generally does not indemnify its                  

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licensees, some of its license agreements require the Company to provide        
technical support and information to a licensee which is involved in            
litigation involving use of Rambus technology. The Company is bound to          
indemnify certain licensees under the terms of certain license agreements, and  
the Company may agree to indemnify others in the future. The Company's support  
and indemnification obligations could result in substantial expenses to the     
Company. In addition to the time and expense required for the Company to        
supply such support or indemnification to its licensees, a licensee's           
development, marketing and sales of Rambus ICs could be severely disrupted or   
shut down as a result of litigation, which in turn could have a material        
adverse effect on the Company's business, financial condition and results of    
operations. See "Business--Patents and Intellectual Property Protection."       

Risks Associated with International Licenses. To date, companies based in   
Japan and Korea have accounted for the substantial majority of the Company's    
revenues, and nearly all of its international revenues. In fiscal 1994, 1995    
and 1996 and the first half of fiscal 1997, international revenues constituted  
approximately 90%, 90%, 86% and 83% of the Company's net revenues,              
respectively. The Company expects that revenues derived from international      
licensees will continue to represent a significant portion of its total         
revenues in the future. All of the revenues from international licensees have   
to date been denominated in United States dollars. However, to the extent that  
such licensees' sales to systems companies are not denominated in United        
States dollars, any royalties that the Company receives as a result of such     
sales could be subject to fluctuations in currency exchange rates. In           
addition, if the effective price of Rambus ICs sold to the Company's foreign    
licensees were to increase as a result of fluctuations in the exchange rate of  
the relevant currencies, demand for Rambus ICs could fall, which in turn would  
reduce the Company's royalties. The Company does not use derivative             
instruments to hedge foreign exchange rate risk. In addition, international     
operations and demand for the products of the Company's licensees are subject   
to a variety of risks, including tariffs, import restrictions and other trade   
barriers, changes in regulatory requirements, longer accounts receivable        
payment cycles, adverse tax consequences, export license requirements, foreign  
government regulation, political and economic instability and changes in        
diplomatic and trade relationships. In particular, the laws of certain          
countries in which the Company currently licenses or may in the future license  
its technology require significant withholding taxes on payments for            
intellectual property, which the Company may not be able to offset fully        
against its United States tax obligations. The Company is subject to the        
further risk of the tax authorities in those countries recharacterizing         
certain engineering fees as license fees, which could result in increased tax   
withholdings and penalties. The Company's licensees are subject to many of the  
risks described above with respect to systems companies which are located in    
different countries, particularly video game and PC manufacturers located in    
Asia and elsewhere. There can be no assurance that one or more of the risks     
associated with international licenses of the Company's technology will not     
have a direct or indirect material adverse effect on the Company's business,    
financial condition and results of operations. Moreover, the laws of certain    
foreign countries in which the Company's technology is or may in the future be  
licensed may not protect the Company's intellectual property rights to the      
same extent as the laws of the United States, thus increasing the possibility   
of infringement of the Company's intellectual property. See "--Limited          
Protection of Intellectual Property; Likelihood of Potential Litigation" and    
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

Dependence on Key Personnel. The Company's success depends to a significant 
extent on its ability to identify, attract, motivate and retain qualified       
technical, sales, marketing, finance and executive personnel. Because the       
future success of the Company is dependent upon its ability to continue         
enhancing and introducing new generations of such technology, the Company is    
particularly dependent upon its ability to identify, attract, motivate and      
retain qualified engineers with the requisite educational background and        
industry experience. As of December 31, 1996, approximately three quarters of   
the Company's personnel had technical degrees, and over half of the Company's   
personnel had graduate level technical degrees. Competition for qualified       
engineers, particularly those with significant industry experience, is          
intense. The Company is also dependent upon its senior management personnel,    
most of whom have worked together at the Company for several years. The loss    
of the services of any of the senior management personnel or a significant      
number of the Company's engineers could be disruptive to the Company's          
development efforts or business relationships and could have a material         
adverse effect on the Company's business, financial condition and results of    
operations. The Company generally does                                          

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not enter into employment contracts with its employees. The Company does not    
plan to maintain key person life insurance in the future. See "Business--       
Employees" and "Management--Executive Officers, Directors and Key Personnel."   

Management of Expanded Operations. The Company is not experienced in        
managing rapid growth. The Company may not be equipped to successfully manage   
any future periods of rapid growth or expansion, which could be expected to     
place a significant strain on the Company's limited managerial, financial,      
engineering and other resources. The Company's licensees and systems companies  
rely heavily on the Company's technological expertise in designing, testing     
and manufacturing products incorporating the Company's interface technologies.  
Relationships with new licensees or systems companies generally require         
significant engineering support. As a result, any increases in adoption of the  
Company's technology will increase the strain on the Company's resources,       
particularly the Company's engineers. Any delays or difficulties in the         
Company's research and development process caused by these factors or others    
could make it difficult for the Company to develop future generations of its    
interface technology and to remain competitive. In addition, the rapid rate of  
hiring new employees could be disruptive and adversely affect the efficiency    
of the Company's research and development process. The rate of the Company's    
future expansion, if any, in combination with the complexity of the technology  
involved in the Company's licensee-based business model, may demand an          
unusually high level of managerial effectiveness in anticipating, planning,     
coordinating and meeting the operational needs of the Company as well as the    
needs of the licensees and systems companies. Additionally, the Company may be  
required to reorganize its managerial structure in order to more effectively    
respond to the needs of customers. Given the small pool of potential licensees  
and target systems companies, the adverse effect on the Company resulting from  
a lack of effective management in any of these areas will be magnified.         
Inability to manage the expansion of the Company's business would have a        
material adverse effect on its business, financial condition and results of     
operations. See "Management."                                                   

No Prior Public Market; Volatility of Stock Price. Prior to this offering,  
there has been no public market for the Company's Common Stock, and there can   
be no assurance that an active public market for the Company's Common Stock     
will develop or be sustained after the offering. The initial public offering    
price has been determined through negotiations between the Company and the      
Underwriters and may not be indicative of the market price of the Common Stock  
after the offering. The trading price of the Company's Common Stock could be    
subject to wide fluctuations in response to quarterly variations in operating   
results, announcements of technological innovations or new products by the      
Company, its licensees or its competitors, developments with respect to         
patents or proprietary rights, changes in financial estimates by securities     
analysts and other events or factors. In addition, the equity markets have      
experienced volatility that has particularly affected the market prices of      
equity securities of many high technology companies and that often has been     
unrelated or disproportionate to the operating performance of such companies.   
These broad market fluctuations may adversely affect the market price of the    
Company's Common Stock. See "Underwriters."                                     

Concentration of Ownership. The Company's officers, directors and their     
affiliates will, in the aggregate, beneficially own approximately 45.8% of the  
Company's outstanding shares after the offering. As a result, these             
stockholders, if acting together, would be able effectively to control          
substantially all matters requiring approval by the stockholders of the         
Company, including the election of directors. This ability may have the effect  
of delaying or preventing a change in control of the Company, or causing a      
change in control of the Company which may not be favored by the Company's      
other stockholders. See "Principal Stockholders."                               

Certain Anti-Takeover Provisions. Upon completion of this offering, the     
Company's Board of Directors will have the authority to issue up to 5,000,000   
shares of Preferred Stock (less 40,000 shares which have been designated        
"Series E Preferred Stock" pursuant to the stockholder rights plan recently     
adopted by the Board of Directors) and to determine the price, rights,          
preferences, privileges and restrictions, including voting rights, of those     
shares without any further vote or action by the stockholders. The rights of    
the holders of Common Stock will be subject to, and may be adversely affected   
by, the rights of the holders of any Preferred Stock that may be issued in the  
future. The issuance of Preferred Stock, while providing flexibility in         
connection with possible financings or acquisitions or other corporate          
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third party to acquire a majority of the outstanding voting stock of the        
Company. The Company has no current plans to issue shares of Preferred Stock.   
The Company's Bylaws and indemnity agreements provide that the Company will     
indemnify officers and directors against losses they may incur in legal         
proceedings resulting from their service to the Company. In addition, the       
Company recently amended its Certificate of Incorporation to provide for a      
classified Board of Directors and eliminate the ability of stockholders to (i)  
call special meetings of the stockholders, (ii) bring certain matters before a  
meeting of the stockholders without prior notice to the Board, or (iii) amend   
or repeal certain of the provisions of the Certificate or Bylaws by a vote of   
less than two thirds of the outstanding stock, and, effective upon the          
completion of this offering, eliminate the ability of stockholders to take      
action by written consent. In addition, Section 203 of the Delaware General     
Corporation Law restricts certain business combinations with any "interested    
stockholder" as defined by such statute. These provisions and the stockholder   
rights plan are designed to encourage potential acquirors to negotiate with     
the Company's Board of Directors and give the Board sufficient opportunity to   
consider various alternatives to maximize stockholder value. These provisions   
and the stockholder rights plan are also intended to discourage certain         
tactics that may be used in proxy fights. However, the stockholder rights plan  
and each of these provisions of the Company's charter documents could           
discourage potential acquisition proposals and could delay or prevent a change  
in control of the Company and, as a consequence, they also may adversely        
affect the market price of the Company's Common Stock. Such provisions also     
may have the effect of preventing changes in the management of the Company.     
See "Description of Capital Stock."                                             

In addition, Intel has a contractual right to make a competitive bid in     
connection with certain types of potential third-party acquisitions of Rambus.  
While Rambus is not required to accept any such competing offer, certain        
penalties would apply upon consummation of a third-party transaction following  
rejection of a bona fide competing offer from Intel. This arrangement with      
Intel may significantly discourage future acquisition attempts, even where      
such acquisitions might be in the best interests of the Rambus stockholders.    
See "Certain Transactions."                                                     

Shares Eligible for Future Sale. Upon completion of this offering (based on 
shares outstanding at March 31, 1997), the Company will have outstanding an     
aggregate of 21,453,651 shares of Common Stock, assuming no exercise of the     
Underwriters' over-allotment option and no exercise of outstanding options. Of  
these shares, all of the shares sold in this offering will be freely tradeable  
without restriction or further registration under the Securities Act, unless    
such shares are purchased by "affiliates" of the Company as that term is        
defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining  
18,703,651 shares of Common Stock held by existing stockholders are             
"restricted securities" as that term is defined in Rule 144 under the           
Securities Act ("Restricted Shares"). Restricted Shares may be sold in the      
public market only if registered or if they qualify for an exemption from       
registration under Rules 144, 144(k) or 701 promulgated under the Securities    
Act. As a result of the contractual restrictions described below and the        
provisions of Rules 144, 144(k) and 701, the Restricted Shares will be          
available for sale in the public market as follows: (i) 25,000 shares will be   
eligible for immediate sale on the date of this Prospectus; and (ii)            
18,678,651 shares will be eligible for sale upon expiration of the lock-up      
agreements at least 180 days after the date of this Prospectus. All officers,   
directors and option holders and substantially all stockholders of the Company  
have agreed not to sell or otherwise transfer any shares of Common Stock or     
any other securities of the Company for a period of at least 180 days after     
the date of this Prospectus (without, in most cases, the prior written consent  
of Morgan Stanley & Co. Incorporated). The Company intends to file a            
registration statement on Form S-8 which would allow shares issuable upon       
exercise of options previously granted to be freely tradeable following         
release of such lock-up obligations, subject to compliance with Rule 144 in     
the case of affiliates of the Company. See "Shares Eligible for Future Sale."   

Dilution. Investors participating in the Offering will incur immediate,     
substantial dilution. To the extent that options or warrants to purchase the    
Company's Common Stock are exercised, there will be further dilution. See       
"Dilution."                                                                     

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Management Discretion over Use of Proceeds. Approximately $1.5 million of   
the net proceeds from the offering are expected to be used by the Company for   
minimum equipment lease and office lease payments and approximately $3.0        
million are expected to be used for capital expenditures over the next          
12 months. A portion of the remaining proceeds may be used for leasehold        
improvements for additional facilities which the Company expects to secure      
during the next twelve months to support expanded operations. The Company has   
no current plans for any significant portion of the remainder of the net        
proceeds from this offering. Accordingly, the Company's management will retain  
broad discretion as to the allocation of a substantial portion of the net       
proceeds from this offering. See "Use of Proceeds."                             

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USE OF PROCEEDS 

The net proceeds to the Company from the sale of the 2,750,000 shares of    
Common Stock offered by the Company hereby will be approximately $29.6 million  
(approximately $34.2 million if the Underwriters' over-allotment option is      
exercised in full), after deducting underwriting discounts and commissions and  
estimated offering expenses payable by the Company. The principal purposes of   
this offering are to obtain additional capital, create a public market for the  
Company's Common Stock and facilitate future access by the Company to public    
equity markets. The Company expects to use at least $1.5 million for minimum    
equipment lease and office lease payments and approximately $3.0 million for    
capital expenditures over the next 12 months. The remaining net proceeds from   
this offering will be used for general corporate purposes, including the        
funding of working capital requirements and leasehold improvements for          
additional facilities which the Company expects to secure during the next       
twelve months to support expanded operations. A portion of the net proceeds     
may also be used to acquire or invest in complementary businesses or products   
or to obtain the right to use complementary technologies. There are no present  
understandings, commitments or agreements with respect to any material          
acquisition of other businesses, products or technologies. Pending such uses,   
the Company will invest the net proceeds received by it in this offering in     
short-term, interest-bearing, investment-grade securities.                      

DIVIDEND POLICY 

The Company has never paid or declared any cash dividends on its Common     
Stock or other securities and does not anticipate paying cash dividends in the  
foreseeable future.                                                             

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CAPITALIZATION  

The following table sets forth the consolidated capitalization and deferred 
revenue of the Company (i) as of March 31, 1997, and (ii) as adjusted to        
reflect the automatic conversion of all outstanding shares of Preferred Stock   
into Common Stock upon the closing of this offering and the receipt by the      
Company of the estimated net proceeds from the sale of the shares of Common     
Stock offered by the Company after deducting underwriting discounts and         
commissions and estimated offering expenses payable by the Company. Since       
inception, the Company has funded its operations primarily from contract fees   
and, to a lesser extent, the sale of capital stock. See "Management's           
Discussion and Analysis of Financial Condition and Results of Operations--      
Liquidity and Capital Resources."                                               

                                                                [Download Table]

                                                             MARCH 31, 1997    
                                                          ---------------------
                                                           ACTUAL   AS ADJUSTED
                                                          --------  -----------
                                                             (IN THOUSANDS,    
                                                           EXCEPT SHARE DATA)  
                                                                               
Deferred revenue......................................... $ 32,217   $ 32,217  
                                                          --------   --------  
Total long-term debt(1).................................. $    296   $    296  
                                                          --------   --------  
Stockholders' equity (deficit):                                                
Convertible preferred stock, $.001 par value:                                  
  Authorized: 11,336,096 shares;                                               
  Issued and outstanding: 11,296,822 shares actual and no                      
   shares as adjusted ...................................       11        --   
Common stock, $.001 par value:                                                 
  Authorized: 22,500,000 shares;                                               
  Issued and outstanding: 7,406,829 shares actual and                          
   21,453,651 shares as adjusted(2)......................        7         21  
Additional paid-in capital...............................   23,809     53,396  
Stockholders' note receivable............................     (733)      (733) 
Accumulated deficit......................................  (34,104)   (34,104) 
Cumulative translation adjustment........................      (55)       (55) 
                                                          --------   --------  
    Total stockholders' equity (deficit) ................ $(11,065)  $ 18,525  
                                                          --------   --------  
    Total capitalization................................. $(10,769)  $ 18,821  
                                                          --------   --------  
    Total capitalization and deferred revenue............ $ 21,448   $ 51,038  
                                                          ========   ========  

--------                                                                        
(1) Total long-term debt consists of indebtedness for capital lease             
obligations, excluding current portion. See Note 8 of Notes to          
Consolidated Financial Statements.                                      
(2) Excludes 2,174,470 shares of Common Stock issuable upon the exercise of     
  options outstanding under the Company's 1990 Stock Plan at March 31, 1997,
with a weighted average exercise price of $2.70 per share and 246,500   
  shares of Common Stock issuable upon the exercise of options granted under
the Company's 1990 Stock Plan subsequent to March 31, 1997, with a      
weighted average exercise price of $8.00 per share. Also excludes (i)   
  1,000,000 shares of Common Stock reserved for issuance under the Company's
  1997 Stock Plan, (ii) 400,000 shares of Common Stock reserved for issuance
  under the Company's 1997 Employee Stock Purchase Plan, and (iii) 1,000,000
  shares of Common Stock issuable upon exercise of an outstanding warrant at
an exercise price of $10.00 per share. See "Management--Stock Plans" and
Notes 10 and 17 of Notes to Consolidated Financial Statements.          

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DILUTION  

The net tangible book value of the Company as of March 31, 1997 was         
$(11,065,000) or $(0.59) per share of Common Stock. Net tangible book value     
per share is determined by dividing the tangible book value of the Company      
(total tangible assets less total liabilities) by the number of outstanding     
shares of Common Stock at that date (assuming the conversion of all             
outstanding shares of Preferred Stock into Common Stock). After giving effect   
to the sale by the Company of the 2,750,000 shares of Common Stock offered      
hereby (after deducting underwriting discounts and commissions and estimated    
offering expenses payable by the Company), the Company's as adjusted net        
tangible book value at March 31, 1997 would have been $18,525,000 or $0.86 per  
share. This represents an immediate increase in net tangible book value to      
existing stockholders of $1.45 per share and an immediate dilution to new       
public investors of $11.14 per share. The following table illustrates the per   
share dilution:                                                                 

                                                                [Download Table]
                                                                            
Initial public offering price per share.....................          $12.00
  Net tangible book value per share as of March 31, 1997....  $(0.59)       
  Increase in net tangible book value per share attributable                
   to new investors.........................................    1.45        
                                                              ------        
As adjusted net tangible book value per share after                         
 offering...................................................            0.86
                                                                      ------
Dilution per share to new public investors..................          $11.14
                                                                      ======

The following table summarizes on an as adjusted basis as of March 31, 1997 
the difference between the number of shares of Common Stock purchased from the  
Company (assuming the conversion of all outstanding shares of Preferred Stock   
into Common Stock), the total consideration paid and the average price per      
share paid by the existing stockholders and by the new investors (before        
deducting underwriting discounts and commissions and estimated offering         
expenses payable by the Company):                                               

                                                                [Download Table]

                                 SHARES PURCHASED  TOTAL CONSIDERATION  AVERAGE 
                                ------------------ -------------------   PRICE  
                                  NUMBER   PERCENT   AMOUNT    PERCENT PER SHARE
                                ---------- ------- ----------- ------- ---------
                                                                                
Existing stockholders.......... 18,703,651   87.2% $23,901,000   42.0%   $1.28  
New public investors...........  2,750,000   12.8   33,000,000   58.0    12.00  
                                ----------  -----  -----------  -----           
  Total........................ 21,453,651  100.0% $56,901,000  100.0%          
                                ==========  =====  ===========  =====           

The foregoing analysis assumes no exercise of the Underwriters' over-       
allotment option and no exercise of stock options and a warrant outstanding at  
March 31, 1997. As of March 31, 1997, there were options outstanding to         
purchase a total of 2,174,470 shares of Common Stock at a weighted average      
exercise price of $2.70 per share and 1,000,000 shares of Common Stock          
issuable upon the exercise of the warrant outstanding as of March 31, 1997 at   
an exercise price of $10.00 per share. In addition, in February 1997, the       
Board of Directors adopted the 1997 Stock Plan and the 1997 Employee Stock      
Purchase Plan, pursuant to which 1,000,000 and 400,000 shares, respectively,    
were reserved for issuance thereunder. As of March 31, 1997, no options or      
shares had been issued under any of these plans. Subsequent to March 31, 1997,  
the Board of Directors granted options under the 1990 Stock Plan to purchase    
an additional 246,500 shares of Common Stock at weighted average exercise       
price of $8.00 per share. To the extent that any of these options or the        
warrant is exercised, there will be further dilution to new public investors.   
See "Capitalization," "Management--Stock Plans" and Notes 10 and 17 of Notes    
to Consolidated Financial Statements.                                           

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SELECTED CONSOLIDATED FINANCIAL DATA  

The following selected consolidated financial data should be read in        
conjunction with the Company's consolidated financial statements and notes      
thereto and "Management's Discussion and Analysis of Financial Condition and    
Results of Operations" included elsewhere in this Prospectus. The consolidated  
statement of operations data for the fiscal years ended September 30, 1994,     
1995 and 1996 and consolidated balance sheet data as of September 30, 1995 and  
1996 are derived from consolidated financial statements which have been         
audited by Coopers & Lybrand L.L.P., independent auditors, included elsewhere   
in this Prospectus. The consolidated statement of operations data for the       
years ended September 30, 1992 and 1993 and the consolidated balance sheet      
data as of September 30, 1992, 1993 and 1994 are derived from consolidated      
financial statements not included in this Prospectus, which have also been      
audited by Coopers & Lybrand L.L.P. The consolidated statement of operations    
data for the six months ended March 31, 1996 and 1997 and the consolidated      
balance sheet data as of March 31, 1997 are derived from the unaudited          
consolidated financial statements included elsewhere in this Prospectus that    
have been prepared on the same basis as the audited consolidated financial      
statements and, in the opinion of management, contain all adjustments,          
consisting only of normal recurring adjustments, necessary for a fair           
presentation of the Company's financial position and results of operations for  
such periods. Historical results are not necessarily indicative of the results  
to be expected in the future and results for interim periods are not            
necessarily indicative of results for the entire year.                          

                                                        [Enlarge/Download Table]

                                                                         SIX MONTHS    
                                                                            ENDED      
                                 YEAR ENDED SEPTEMBER 30,                 MARCH 31,    
                          -------------------------------------------  ----------------
                           1992     1993     1994     1995     1996     1996     1997  
                          -------  -------  -------  -------  -------  -------  -------
                           (IN THOUSANDS, EXCEPT PER SHARE DATA)         (UNAUDITED)   
                                                                                       
CONSOLIDATED STATEMENT                                                                 
 OF OPERATIONS DATA:                                                                   
Revenues:                                                                              
 Contract revenues......  $ 1,916  $ 3,371  $ 5,000  $ 7,364  $11,205  $ 5,072  $ 8,467
 Royalties..............      --       --       --       --        65      --     2,958
                          -------  -------  -------  -------  -------  -------  -------
 Total revenues.........    1,916    3,371    5,000    7,364   11,270    5,072   11,425
                          -------  -------  -------  -------  -------  =======  -------
Costs and expenses:                                                                    
 Cost of contract                                                                      
  revenues..............    1,053    1,950    3,844    5,236    4,821    2,301    2,396
 Research and                                                                          
  development...........    3,546    4,291    3,067    3,117    5,218    2,413    4,368
 Sales and marketing....    1,250    1,798    2,569    3,376    4,052    1,781    2,867
 General and                                                                           
  administrative........    1,814    1,294    1,717    1,688    1,747      833    1,278
                          -------  -------  -------  -------  -------  -------  -------
 Total costs and                                                                       
  expenses..............    7,663    9,333   11,197   13,417   15,838    7,328   10,909
                          -------  -------  -------  -------  -------  -------  -------
Operating income                                                                       
 (loss).................   (5,747)  (5,962)  (6,197)  (6,053)  (4,568)  (2,256)     516
Other income (expense)..      115     (123)     (81)     322      439      204      125
                          -------  -------  -------  -------  -------  -------  -------
Income (loss) before                                                                   
 income taxes...........   (5,632)  (6,085)  (6,278)  (5,731)  (4,129)  (2,052)     641
Provision for income                                                                   
 taxes..................      962      251      351    1,289      286      183      253
                          -------  -------  -------  -------  -------  -------  -------
Net income (loss).......  $(6,594) $(6,336) $(6,629) $(7,020) $(4,415) $(2,235) $   388
                          =======  =======  =======  =======  =======  =======  =======
Net income (loss) per                                                                  
 share(1)...............  $ (2.24) $ (1.44) $ (1.29) $ (1.24) $ (0.73) $ (0.37) $  0.02
                          =======  =======  =======  =======  =======  =======  =======
Shares used in per share                                                               
 calculations(1)........    2,945    4,394    5,124    5,665    6,088    6,047   20,083

                                                                [Download Table]

                                       SEPTEMBER 30,                                
                         ----------------------------------------------   MARCH 31, 
                          1992     1993      1994      1995      1996       1997    
                         -------  -------  --------  --------  --------  -----------
                                       (IN THOUSANDS)                    (UNAUDITED)
                                                                                    
CONSOLIDATED BALANCE                                                                
 SHEET DATA:                                                                        
Cash, cash equivalents                                                              
 and marketable                                                                     
 securities............. $ 1,866  $ 2,459  $  5,046  $ 14,150  $  8,554   $ 10,492  
Total assets............   5,300    7,807     8,395    18,307    12,868     23,843  
Total debt(2)...........   1,055    1,698     1,655     1,616     1,297        847  
Stockholders' deficit...  (7,061)  (8,351)  (10,006)   (7,936)  (12,144)   (11,065) 

--------                                                                        
(1) For an explanation of net income (loss) per share and shares used in per    
share calculations, see Note 2 of the Notes to Consolidated Financial   
  Statements included elsewhere in this Prospectus. The pro forma net income
 (loss) per share for the year ended September 30, 1996 and the six months
ended March 31, 1997 was $(0.25) and $0.02, respectively. The pro forma 
shares used in per share calculations for the year ended September 30,  
1996 and the six months ended March 31, 1997 were 17,385 and 20,083,    
respectively.                                                           
(2) Total debt consists of indebtedness for borrowed money and capital lease    
obligations.                                                            

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.   
The following discussion contains forward-looking statements. The Company's     
actual results may differ significantly from those projected in the forward-    
looking statements. Factors that might cause future actual results to differ    
materially from the Company's recent results or those projected in the          
forward-looking statements include, but are not limited to, those discussed in  
"Risk Factors" and below. The Company assumes no obligation to update the       
forward-looking statements or such factors.                                     

OVERVIEW                                                                        

Since its founding in March 1990, Rambus has been engaged in the development
of high-speed chip-to-chip interface technology which can be used to enhance    
the performance and cost-effectiveness of consumer electronics, computer        
systems and other electronic systems. The Company neither manufactures nor      
sells semiconductors incorporating the Company's technology. Rather, the        
Company licenses its technology on a nonexclusive and worldwide basis to        
semiconductor companies which manufacture and sell RDRAMs and logic ICs         
containing RACs to systems companies which have adopted Rambus technology.      
Systems companies are not required to obtain a Rambus license to incorporate    
Rambus ICs into their products. See "Business."                                 

REVENUES                                                                      

The Company's revenues consist of contract fees and royalties. Contract fees
are comprised of license fees, engineering service fees and nonrefundable,      
prepaid royalties, and have represented substantially all of the Company's      
revenues through fiscal 1996. The Company's contracts generally require a       
licensee to pay a contract fee to Rambus typically ranging from a few hundred   
thousand dollars for a narrow license covering a single logic product to        
millions of dollars for a license with broad coverage of Rambus technology.     
Part of these fees may be due upon the achievement of certain milestones, such  
as provision of certain deliverables by Rambus or production of chips by the    
licensee. All contract fees are nonrefundable. See "Business--Rambus            
Licensees" and "--Rambus Business Model and Strategy."                          

In a few cases, the Company has received nonrefundable, prepaid royalties   
which offset the earliest royalty payments otherwise due from the licensee. As  
of March 31, 1997, $2.7 million of such nonrefundable, prepaid royalties had    
offset initial royalties, and the Company had a balance of $4.1 million         
remaining to be offset against future royalties.                                

Royalties, which are generally a percentage of the revenues received by a   
licensee on its sales of Rambus ICs, are normally payable by the licensee on    
sales occurring during the life of the Rambus patents being licensed. For a     
typical application of Rambus technology, the Company receives royalties from   
the sale of both RDRAMs and logic ICs containing RACs. Royalty rates range up   
to a maximum of approximately 2.5% for RDRAMs and a maximum of approximately    
5% for logic ICs, and in some cases may decline based on the passage of time    
or on the total volume of Rambus ICs shipped by a licensee. The exact rate and  
structure of a royalty arrangement with a particular licensee depend on a       
number of factors, including the amount of the contract fee paid by the         
licensee and the marketing and engineering commitment made by the licensee.     

Substantially all of the license fees, engineering service fees and         
nonrefundable, prepaid royalties are bundled together as contract fees because  
the Company generally does not provide or price these components separately.    
The contracts also generally include rights to upgrades and enhancements.       
Accordingly, Rambus recognizes contract revenues ratably over the period        
during which post-contract customer support is expected to be provided. The     
excess of contract fees received over contract revenue recognized is shown on   
the Company's balance sheet as "deferred revenue." As of March 31, 1997, the    
Company's deferred revenue was $32.2 million, substantially all of which is     
scheduled to be recognized in varying amounts over the next five years.         

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Rambus recognizes royalties from a licensee in the quarter in which it      
receives the report detailing shipments of Rambus ICs by such licensee in the   
prior quarter. The first sale of Rambus ICs by a licensee occurred during the   
fourth quarter of fiscal 1994. However, due to a combination of the one-        
quarter reporting delay and nonrefundable, prepaid royalty offsets, the first   
royalties were not reported by the Company until the third quarter of fiscal    
1996. Royalties became significant only during the first two quarters of        
fiscal 1997, and the Company does not expect a significant increase in royalty  
revenue in the near term. However, as prepaid royalties are offset and as       
Rambus ICs are incorporated into additional applications, the Company believes  
that royalties will become an increasing portion of revenues over the long      
term. See Note 2 of Notes to Consolidated Financial Statements.                 

In the past, certain components of the Company's revenues have fluctuated   
and have been difficult to predict. The Company expects that this will          
continue to be the case in the future. Although the schedule for recognizing    
deferred revenue under existing contracts is known, it is difficult for the     
Company to predict the timing and amount of deferred revenue streams            
associated with new contracts, if any, because the Company's contracts          
typically involve long business development cycles and negotiated financial     
terms. The Company's contract revenues may be subject to sudden increases or    
decreases upon the addition of a new contract or the expiration of the          
deferred revenue schedule under an existing contract. Because these events may  
involve substantial amounts and do not occur with any regularity, any such      
increase or decrease generally is not indicative of future period-to-period     
increases or decreases. The Company believes that its continued success will    
be substantially dependent upon royalties increasing at a rate which more than  
offsets decreases in the recognition of deferred revenue under existing         
contracts as their recognition periods expire, as well as the Company's         
ability to add new licensees and to license new generations of its technology   
to its existing licensees. Nonrefundable, prepaid royalties, which are bundled  
into contract fees, are recognized ratably over the period during which post-   
contract customer support is expected to be provided, and are not related to    
the actual rate at which Rambus ICs are shipped by the licensee. Accordingly,   
the amount of nonrefundable, prepaid royalties recognized in a period is not    
necessarily representative of the rate at which the prepaid royalties are       
being offset. In addition, the Company may experience sudden and significant    
fluctuations in royalties to the extent that one or more systems companies      
switches its source of Rambus ICs for a particular application to a licensee    
with a different nonrefundable, prepaid royalty balance or different royalty    
rate than the original source. See "Risk Factors--Unpredictable and             
Fluctuating Operating Results."                                                 

To date, a majority of the Company's royalties has been derived from the    
sale of logic ICs incorporating RACs. If the Company is successful in its       
strategy to penetrate the PC main memory market segment, the Company expects    
that royalties from the sale of RDRAMs will eventually account for the largest  
portion of royalties. See "Risk Factors--Future Dependence upon PC Main Memory  
Market Segment and Intel" and "--Reliance upon DRAM Market; Declines in DRAM    
Price and Unit Volume per System."                                              

As of March 31, 1997, the Company had 20 licensees. Because all of the      
Company's revenues are derived from its relatively small number of licensees,   
the Company's revenues tend to be highly concentrated. In fiscal 1994, 1995     
and 1996 and the first half of fiscal 1997, revenues from the top five          
licensees accounted for approximately 86%, 70%, 65% and 70% of the Company's    
revenues, respectively. In the first half of fiscal 1997, NEC accounted for     
approximately 32% of revenues and LG Semicon accounted for approximately 11%    
of revenues. The Company expects that it will continue to experience            
significant revenue concentration for the foreseeable future. However, the      
particular licensees which account for revenue concentration may vary from      
period to period depending on the addition of new contracts, the expiration of  
deferred revenue schedules under existing contracts, and the volumes and        
prices at which the licensees sell Rambus ICs to systems companies in any       
given period. See "Risk Factors--Revenue Concentration" and Note 3 of Notes to  
Consolidated Financial Statements.                                              

The royalties received by the Company are also a function of the adoption of
Rambus technology by systems companies and the acceptance of the systems        
companies' products by end users. The Company generally does not have a direct  
contractual relationship with systems companies, and the royalty reports        
submitted by the Company's licensees generally do not disclose the identity     
of, or unit volume of Rambus ICs purchased by,                                  

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particular systems companies. As a result, it is difficult for the Company to   
predict the extent to which its future revenues will be dependent upon          
particular systems companies. See "Risk Factors--Dependence upon Systems        
Companies."                                                                     

To date, companies based in Japan and Korea have accounted for the          
substantial majority of the Company's revenues, and nearly all of its           
international revenues. In fiscal 1994, 1995 and 1996 and the first half of     
fiscal 1997, international revenues comprised approximately 90%, 90%, 86% and   
83% of the Company's net revenues, respectively. The Company expects that       
revenues derived from international licensees will continue to represent a      
significant portion of its total revenues in the future. All of the revenues    
from international licensees to date have been denominated in United States     
dollars. See "Risk Factors--Risks Associated with International Licenses" and   
Note 14 of Notes to Consolidated Financial Statements.                          

EXPENSES                                                                      

Since the Company's inception in March 1990, its engineering costs (which   
consist of cost of contract revenues and research and development expenses)     
and sales and marketing expenses have continually increased as the Company has  
added personnel and ramped up its activities in these areas. Engineering costs  
and sales and marketing expenses generally have decreased as a percentage of    
revenues throughout this period due to the relatively rapid revenue base        
expansion which the Company experienced as it began entering into license       
agreements. The Company intends to continue making significant expenditures     
associated with engineering and sales and marketing, and expects that these     
costs and expenses will continue to be a significant percentage of revenues in  
future periods. Whether such expenses increase or decrease as a percentage of   
revenues will be substantially dependent upon the rate at which the Company's   
revenues change. See Note 2 of Notes to Consolidated Financial Statements.      

Engineering costs are allocated between cost of contract revenues and       
research and development expenses. Cost of contract revenues is determined      
based on the portion of engineering costs which have been incurred during the   
period for the adaptation of Rambus interface technology for specific licensee  
processes. The balance of engineering costs, incurred for general development   
of Rambus technology, is charged to research and development. In a given        
period, the allocation of engineering costs between these two components is a   
function of the timing of development and implementation cycles. As a           
generation of technology matures from the development stage through             
implementation, the majority of engineering costs shifts from research and      
development expenses to cost of contract revenues. Engineering costs are        
recognized as incurred and do not correspond to the recognition of revenues     
under the related contracts. See "Business--Technology and Products" and "--    
Research and Development."                                                      

Sales and marketing expenses include salaries, travel expenses and costs    
associated with trade shows, advertising and other marketing efforts. Costs of  
technical support for systems companies, including applications engineering,    
are also expensed to sales and marketing. Consistent with the Company's         
business model, sales and marketing activities are focused on developing        
relationships with potential licensees and on participating with existing       
licensees in marketing, sales and technical efforts directed to systems         
companies. In many cases, Rambus must dedicate substantial resources to market  
to and support systems companies. Due to the long business development cycles   
faced by the Company, as well as the fact that the Company does not have a      
commission compensation structure, sales and marketing expenses in a given      
period generally are unrelated to the level of revenues in that period or in    
recent or near-term future periods. See "Business--Rambus Business Model and    
Strategy" and "--Sales and Marketing."                                          

TAXES                                                                         

The Company has incurred cumulative net operating losses for federal tax    
purposes of approximately $8.9 million through September 30, 1996. Net          
operating losses for state tax purposes were approximately $3.5 million         
through September 30, 1996. The Company also has foreign tax credit             
carryforwards of approximately $2.4 million, and research and development       
credit carryforwards of $868,000 through September 30, 1996.                    

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The Company reports certain items of income and expense for financial       
statement purposes in different years than they are reported in the tax         
return. Specifically, the Company reports contract fees and royalties when      
received for tax purposes, as required by tax law. For financial reporting      
purposes, the Company records revenues from contract fees over the period       
post-contract support is expected to be provided. Accordingly, the Company's    
net operating loss for tax purposes is less than the cumulative operating       
deficit recorded for financial statement purposes. See Notes 2 and 12 of Notes  
to Consolidated Financial Statements.                                           

RESULTS OF OPERATIONS                                                           

The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain items reflected in the Company's          
consolidated statements of operations:                                          

                                                                [Download Table]

                                                                SIX MONTHS    
                                                                   ENDED      
                               YEARS ENDED SEPTEMBER 30,         MARCH 31,    
                              -------------------------------   ------------- 
                                1994        1995       1996     1996    1997  
                              ---------   --------   --------   -----   ----- 
                                                                              
Revenues:                                                                     
  Contract revenues..........     100.0 %    100.0 %     99.4 % 100.0 %  74.1%
  Royalties..................       --         --         0.6     --     25.9 
                              ---------   --------   --------   -----   ----- 
    Total revenues...........     100.0 %    100.0 %    100.0 % 100.0 % 100.0%
                              =========   ========   ========   =====   ===== 
Costs and Expenses:                                                           
  Cost of contract revenues..      76.9       71.1       42.8    45.4    21.0 
  Research and development...      61.3       42.3       46.3    47.6    38.2 
  Sales and marketing........      51.4       45.8       36.0    35.1    25.1 
  General and                                                                 
   administrative............      34.3       22.9       15.5    16.4    11.2 
                              ---------   --------   --------   -----   ----- 
    Total costs and                                                           
     expenses................     223.9      182.2      140.5   144.5    95.5 
                              ---------   --------   --------   -----   ----- 
Operating income (loss)......    (123.9)     (82.2)     (40.5)  (44.5)    4.5 
Other income (expense).......      (1.6)       4.4        3.9     4.0     1.1 
                              ---------   --------   --------   -----   ----- 
Income (loss) before income                                                   
 taxes.......................    (125.6)     (77.8)     (36.6)  (40.5)    5.6 
Provision for income taxes...       7.0       17.5        2.5     3.6     2.2 
                              ---------   --------   --------   -----   ----- 
Net income (loss)............    (132.6)%    (95.3)%    (39.2)% (44.1)%   3.4%
                              =========   ========   ========   =====   ===== 

SIX MONTHS ENDED MARCH 31, 1996 AND 1997                                      

Revenues. Revenues were $5.1 million and $11.4 million in the first half of 
fiscal 1996 and fiscal 1997, respectively. Contract revenues increased 67.0%,   
from $5.1 million in the first half of fiscal 1996 to $8.5 million in the       
first half of fiscal 1997. This increase was a result of the Company's          
entering into contracts with new licensees and additional contracts with        
current licensees for new developments, especially for an extension of the      
Company's technology to provide a higher bandwidth interface for future PC      
main memory applications.                                                       

The Company recorded its first significant royalties in the first half of   
fiscal 1997, a total of $3.0 million, consisting primarily of royalties from    
NEC, which the Company believes were largely based on sales of Rambus ICs for   
use in the Nintendo 64 home video game system. Royalties constituted 25.9% of   
total revenues in the first half of fiscal 1997. The Company anticipates that   
its potential to generate royalties in the remainder of fiscal 1997 is largely  
dependent on system sales by Nintendo and, to a lesser extent, sales by Cirrus  
Logic and Chromatic. Nintendo faces intense competitive pressure in the home    
video game market, which is characterized by extreme volatility, frequent new   
product introductions and rapidly shifting consumer preferences, and there can  
be no assurance as to the unit volumes of Rambus ICs that will be purchased by  
Nintendo in the future or the level of royalty-bearing revenues that the        
Company's licensees will receive from Nintendo. None of the systems companies   
currently incorporating Rambus interface technology into their products is      
contractually                                                                   

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obligated to continue using Rambus ICs. See "Risk Factors--Dependence upon      
Systems Companies," "--Revenue Concentration," "Business--Rambus Licensees"     
and "--Rambus Business Model and Strategy."                                     

Engineering Costs. Engineering costs, consisting of cost of contract        
revenues and research and development expenses, were $4.7 million and $6.8      
million, which represented 92.9% and 59.2% of revenues, in the first half of    
fiscal 1996 and fiscal 1997, respectively. The increase in engineering costs    
was due primarily to an increase in engineering personnel, and the decrease as  
a percentage of revenues was primarily the result of the Company's growth in    
revenues.                                                                       

Cost of Contract Revenues. Cost of contract revenues was $2.3 million and   
$2.4 million, which represented 45.4% and 21.0% of revenues, in the first half  
of fiscal 1996 and fiscal 1997, respectively. The decrease in cost of contract  
revenues as a percentage of revenues from the first half of fiscal 1996 to the  
first half of fiscal 1997 was primarily the result of the Company's growth in   
revenues. The Company believes that the level of cost of contract revenues      
will continue to fluctuate in the future, both in absolute dollars and as a     
percentage of revenues, as new generations of Rambus ICs go through the normal  
development and implementation phases.                                          

Research and Development. Research and development expenses were $2.4       
million and $4.4 million, which represented 47.6% and 38.2% of revenues, in     
the first half of fiscal 1996 and fiscal 1997, respectively. Research and       
development expenses increased 81.0% in the first half of fiscal 1997 compared  
to the same period in fiscal 1996 due to development efforts related to a new   
generation of 64 Mbit RDRAMs and associated RACs, including an extension of     
the Company's technology to provide a higher bandwidth interface for future PC  
main memory applications. The higher costs were primarily due to increased      
engineering personnel. The Company expects research and development expenses    
to increase over time as it enhances and improves its technology and applies    
it to new generations of ICs. The rate of increase of, and the percentage of    
revenues represented by, research and development expenses in the future will   
vary from period to period based on the research and development projects       
underway and the change in research and development headcount in any given      
period, as well as the rate of change in the Company's total revenues.          

Sales and Marketing. Sales and marketing expenses were $1.8 million and $2.9
million, which represented 35.1% and 25.1% of revenues, in the first half of    
fiscal 1996 and fiscal 1997, respectively. Sales and marketing expenses         
increased 61.0% in the first half of fiscal 1997 compared to the same period    
in fiscal 1996 due to a buildup of the marketing and sales teams in both the    
U.S. and Japan as well as increased costs associated with applications          
engineering and other technical support for systems companies, trade shows,     
advertising and other marketing efforts. The decrease in sales and marketing    
expenses as a percentage of revenues reflects the increased revenue base. The   
Company expects sales and marketing expenses to increase in the future as the   
Company puts additional effort into marketing its technology and assisting      
systems companies to adapt this technology to new generations of products. The  
rate of increase of, and the percentage of revenues represented by, sales and   
marketing expenses in the future will vary from period to period based on the   
trade shows, advertising and other sales and marketing activities undertaken    
and the change in sales and marketing headcount in any given period, as well    
as the rate of change in the Company's total revenues.                          

General and Administrative. General and administrative expenses were        
$833,000 and $1.3 million, which represented 16.4% and 11.2% of revenues, in    
the first half of fiscal 1996 and fiscal 1997, respectively. General and        
administrative expenses increased 53.4% in the first half of fiscal 1997        
compared to the first half of fiscal 1996 as the Company added headcount to     
support an increasing number of employees and licensees. As a percentage of     
revenues, general and administrative expenses decreased, reflecting the         
increased revenue base. The Company anticipates incurring additional general    
and administrative expenses in the future as required to support an increasing  
number of employees and licensees and as a result of becoming a public          
company.                                                                        

Other Income (Expense). Net other income consists primarily of interest     
income from the Company's short-term cash investments, offset by interest       
expense on leases and other equipment financing. Net other income was $204,000  
and $125,000, which represented 4.0% and 1.1% of revenues, in the first half    
of fiscal                                                                       

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1996 and fiscal 1997, respectively. Net other income decreased 38.7% in the     
first half of fiscal 1997 compared to the first half of fiscal 1996 due to      
lower interest income on a lower average cash investment balance in the fiscal  
1997 period. The Company expects net other income to increase in the future     
due to additional interest income on higher cash balances.                      

Provision for Income Taxes. The Company recorded a provision for income     
taxes of $253,000 in the first half of fiscal 1997, an increase of 38.3% over   
the $183,000 recorded in the first half of fiscal 1996. Whereas the 1996        
provision primarily represents foreign withholding tax on license revenue, the  
1997 provision is based on an estimated federal and state combined rate of 40%  
on income before income taxes. See Notes 2 and 12 of Notes to Consolidated      
Financial Statements.                                                           

YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996                                 

Revenues. Revenues were $5.0 million, $7.4 million and $11.3 million in     
fiscal 1994, 1995 and 1996, respectively. In both fiscal 1994 and fiscal 1995,  
the Company had no royalties, and the 47.3% increase in fiscal 1995 compared    
to fiscal 1994 was due to a combination of new license contracts and a full     
year of revenues from contracts booked during fiscal 1994. While the Company    
received its first royalties in fiscal 1996, most of the 53.0% increase in      
revenues compared to fiscal 1995 was again due to a combination of new          
contracts and a full year of revenues from contracts booked during fiscal       
1995.                                                                           

Engineering Costs. Engineering costs, consisting of cost of contract        
revenues and research and development expenses, were $6.9 million, $8.4         
million and $10.0 million, which represented 138.2%, 113.4% and 89.1% of        
revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in          
engineering costs was due primarily to an increase in engineering personnel,    
and the decrease as a percentage of revenues was primarily the result of the    
Company's growth in revenues.                                                   

Cost of Contract Revenues. Cost of contract revenues was $3.8 million, $5.2 
million and $4.8 million, which represented 76.9%, 71.1% and 42.8% of           
revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in          
absolute dollars from fiscal 1994 to fiscal 1995 was due to headcount           
increases and costs associated with implementation, customization, customer     
support and enhancements for a growing base of technology licensees. During     
fiscal 1994 and fiscal 1995, most of these licensees were in the pre-           
production phase of developing 16 Mbit and 18 Mbit Rambus RDRAMs and            
associated RACs, and therefore the related costs of Company implementation and  
support were high. Cost of contract revenues decreased 7.9% in fiscal 1996      
compared to fiscal 1995 due to several of the Company's licensees reaching the  
production phase during fiscal 1996, thus reducing the implementation,          
customization, support and enhancement services required of the Company. The    
decrease in cost of contract revenues as a percentage of revenues from fiscal   
1994 to fiscal 1996 was primarily the result of the Company's growth in         
revenues.                                                                       

Research and Development. Research and development expenses were $3.1       
million, $3.1 million and $5.2 million, which represented 61.3%, 42.3% and      
46.3% of revenues, in fiscal 1994, fiscal 1995 and fiscal 1996, respectively.   
Research and development expenses remained relatively flat between fiscal 1994  
and fiscal 1995 due to the requirement for the Company's engineering            
department to focus on licensee-specific implementations of 16 Mbit and 18      
Mbit Rambus RDRAMs and associated RACs, which is charged to cost of contract    
revenues. Research and development expenses increased 67.4% in fiscal 1996      
compared to fiscal 1995 due to development efforts associated with a new        
generation of 64 Mbit RDRAMs and associated RACs. The higher costs were         
primarily due to increased headcount.                                           

Sales and Marketing. Sales and marketing expenses were $2.6 million, $3.4   
million and $4.1 million, which represented 51.4%, 45.8% and 36.0% of           
revenues, in fiscal 1994, 1995 and 1996, respectively. This increase in         
absolute dollars reflected the building of the sales and marketing teams in     
both the U.S. and Japan, development of an applications engineering group to    
help systems companies adapt Rambus technology to their needs, costs            
associated with trade shows and other marketing efforts. The decrease in sales  
and marketing expenses as a percentage of revenues reflected the increased      
revenue base.                                                                   

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General and Administrative. General and administrative expenses remained    
flat at $1.7 million, which represented 34.3%, 22.9% and 15.5% of revenues, in  
fiscal 1994, 1995 and 1996, respectively. In absolute dollars, these expenses   
remained relatively constant as the Company was able to increase its revenues   
without significantly increasing its infrastructure. As a percentage of         
revenues, general and administrative expenses decreased, reflecting the         
increased revenue base.                                                         

Other Income (Expense). Net other income (expense) was $(81,000), $322,000  
and $439,000, which represented (1.6)%, 4.4% and 3.9% of revenues, in fiscal    
1994, 1995 and 1996, respectively. The increase in absolute dollars was due to  
interest on higher average cash investment balances, offset by interest         
associated with leased equipment.                                               

Provision for Income Taxes. The Company reported a tax net operating loss of
approximately $3.6 million for fiscal 1994. For fiscal 1995, the Company        
reported taxable income of approximately $2.1 million, attributable to          
contract fees received during that year. While net operating loss carryovers    
were available to offset this income, alternative minimum tax of approximately  
$40,000 for federal purposes and approximately $14,000 for state purposes was   
incurred. The Company had a tax net operating loss of approximately $4.9        
million in the year ended September 30, 1996.                                   

For fiscal 1994, 1995 and 1996, the Company paid foreign withholding taxes  
of approximately $350,000, $1.2 million and $270,000, respectively, on income   
from contract fees and royalties. These taxes may potentially be claimed as     
foreign tax credits for U.S. federal tax purposes, provided the Company incurs  
future U.S. tax liability, and are subject to foreign tax credit limitations    
and a five year carryover restriction imposed by U.S. tax law. See Notes 2 and  
12 of Notes to Consolidated Financial Statements.                               

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QUARTERLY RESULTS OF OPERATIONS                                                 

The following tables present certain unaudited quarterly consolidated       
statements of operations data, both in absolute dollars and as a percentage of  
revenues, for the six quarters ended March 31, 1997. In the opinion of          
management, this information has been presented on the same basis as the        
audited consolidated financial statements appearing elsewhere in this           
Prospectus, and all necessary adjustments have been included in the amounts     
stated below to present fairly the unaudited quarterly results when read in     
conjunction with the audited consolidated financial statements of the Company.  
Results of operations for any quarter are not necessarily indicative of the     
results to be expected for the entire fiscal year or for any future period.     

                                                        [Enlarge/Download Table]

                                              QUARTER ENDED                            
                          -------------------------------------------------------------
                          DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31, MAR. 31,
                            1995       1996       1996       1996       1996     1997  
                          --------   --------   --------   --------   -------- --------
                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)                
                                                                                       
Revenues:                                                                              
  Contract revenues.....  $ 2,510    $ 2,562    $ 2,833    $ 3,299     $4,066   $4,401 
  Royalties.............      --         --           1         64      1,425    1,533 
                          -------    -------    -------    -------     ------   ------ 
    Total revenues......    2,510      2,562      2,834      3,363      5,491    5,934 
                          -------    -------    -------    -------     ------   ------ 
Costs and Expenses:                                                                    
  Cost of contract                                                                     
   revenues.............    1,115      1,186      1,275      1,245      1,037    1,359 
  Research and                                                                         
   development..........    1,142      1,271      1,235      1,569      2,263    2,105 
  Sales and marketing...      955        826      1,100      1,171      1,485    1,382 
  General and                                                                          
   administrative.......      454        379        397        518        603      675 
                          -------    -------    -------    -------     ------   ------ 
    Total costs and                                                                    
     expenses...........    3,666      3,662      4,007      4,503      5,388    5,521 
                          -------    -------    -------    -------     ------   ------ 
Operating income                                                                       
 (loss).................   (1,156)    (1,100)    (1,173)    (1,140)       103      413 
Other income (expense)..      112         92         85        151         45       80 
                          -------    -------    -------    -------     ------   ------ 
Income (loss) before                                                                   
 income taxes...........   (1,044)    (1,008)    (1,088)      (989)       148      493 
Provision for income                                                                   
 taxes..................       82        101        --         103         56      197 
                          -------    -------    -------    -------     ------   ------ 
Net income (loss).......  $(1,126)   $(1,109)   $(1,088)   $(1,092)    $   92   $  296 
                          -------    -------    -------    -------     ------   ------ 
Net income (loss) per                                                                  
 share..................  $ (0.19)   $ (0.18)   $ (0.18)   $ (0.18)    $ 0.01   $ 0.01 
                          =======    =======    =======    =======     ======   ====== 
Shares used in per share                                                               
 calculation............    5,997      6,097      6,113      6,145     19,971   20,196 

                                       AS A PERCENTAGE OF REVENUES                     
                          -------------------------------------------------------------
                          DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31, MAR. 31,
                            1995       1996       1996       1996       1996     1997  
                          --------   --------   --------   --------   -------- --------
                                                                                       
Revenues:                                                                              
  Contract revenues.....    100.0%     100.0%     100.0%      98.1%      74.0%    74.2%
  Royalties.............      --         --         --         1.9       26.0     25.8 
                          -------    -------    -------    -------     ------   ------ 
    Total revenues......    100.0%     100.0%     100.0%     100.0%     100.0%   100.0%
                          =======    =======    =======    =======     ======   ====== 
Costs and Expenses:                                                                    
  Cost of contract                                                                     
   revenues.............     44.4       46.3       45.0       37.0       18.9     22.9 
  Research and                                                                         
   development..........     45.5       49.6       43.6       46.7       41.2     35.5 
  Sales and marketing...     38.0       32.2       38.8       34.8       27.0     23.3 
  General and                                                                          
   administrative.......     18.1       14.8       14.0       15.4       11.0     11.4 
                          -------    -------    -------    -------     ------   ------ 
    Total costs and                                                                    
     expenses...........    146.1      142.9      141.4      133.9       98.1     93.1 
                          -------    -------    -------    -------     ------   ------ 
Operating income                                                                       
 (loss).................    (46.1)     (42.9)     (41.4)     (33.9)       1.9      7.0 
Other income (expense)..      4.5        3.6        3.0        4.5        0.8      1.4 
                          -------    -------    -------    -------     ------   ------ 
Income (loss) before                                                                   
 income taxes...........    (41.6)     (39.3)     (38.4)     (29.4)       2.7      8.3 
Provision for income                                                                   
 taxes..................      3.3        3.9        --         3.1        1.0      3.3 
                          -------    -------    -------    -------     ------   ------ 
Net income (loss).......    (44.9)%    (43.3)%    (38.4)%    (32.5)%      1.7%     5.0%
                          =======    =======    =======    =======     ======   ====== 

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The Company's contract revenues have increased in each of the last six      
quarters due to the addition of both new licensees and new engineering          
implementations for existing licensees. While quarterly revenues from existing  
licenses is predictable over the contracts' respective lives, total contract    
revenues will decline in the future if the Company does not continue to obtain  
new licensees or if it is unsuccessful in securing new engineering              
implementation work from existing licensees.                                    

Royalties became significant only in the first two quarters of fiscal 1997  
and are the primary reason the Company became profitable in those quarters.     
During each of those quarters, the Company received royalty reports from the    
three licensees which had shipped Rambus-based products. Of these, one          
licensee's royalties were completely offset against nonrefundable, prepaid      
royalties and another, NEC, accounted for substantially all of the royalties    
for the two quarters. While licensee reports generally do not break down sales  
of license-bearing products by customer, the Company believes that a large      
percentage of the royalties from NEC for the first two quarters of fiscal 1997  
were due to sales of Rambus ICs to Nintendo for incorporation in the Nintendo   
64 home video game system. With such a concentration of royalties based on one  
system, it is likely that royalties will vary greatly in subsequent quarters.   
If royalties were to decline, the Company would likely again become             
unprofitable.                                                                   

Costs and expenses have generally increased in each of the six quarters     
ended March 31, 1997. Cost of contract revenues has remained relatively flat    
during this period, reflecting both the relative independence of this cost      
element from revenue changes and the relatively flat requirement for            
engineering implementation, customization, customer support and enhancements    
over this period. On the other hand, research and development expenses have     
generally increased over this period due principally to personnel additions     
associated with application of the Company's technology to a new generation of  
64 Mbit RDRAMs and associated RACs, including an extension of the Company's     
technology to provide a higher bandwidth interface for future PC main memory    
applications. Sales and marketing expenses also generally increased over this   
period due to a buildup of the marketing and sales teams, as well as increased  
costs associated with applications engineering and other technical support for  
systems companies, trade shows, advertising and other marketing efforts.        
General and administrative expenses generally increased during this period as   
the Company added headcount to support an increasing number of employees and    
licensees. The Company believes that engineering costs, sales and marketing     
expenses and general and administrative expenses all will increase in future    
quarters.                                                                       

The Company has granted to Intel Corporation a warrant for the purchase of  
1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The  
warrant will become exercisable only upon the achievement of certain            
milestones, which will result in a charge to the statement of operations at     
the time of achievement of the milestones based on the fair value of the        
warrant.                                                                        

The Company's business is subject to a variety of additional risks that     
could materially adversely affect quarterly and annual operating results,       
including market acceptance of the Company's technology; systems companies'     
acceptance of Rambus ICs produced by the Company's licensees; market            
acceptance of the products of systems companies which have adopted the          
Company's technology; the loss of any strategic relationships with systems      
companies or licensees; announcements or introductions of new technologies or   
products by the Company or the Company's competitors; delays or problems in     
the introduction or performance of enhancements or future generations of the    
Company's technology; fluctuations in the market price and demand for DRAMs     
and logic ICs into which the Company's technology has been incorporated;        
competitive pressures resulting in lower contract revenues or royalty rates;    
changes in the Company's and system companies' development schedules and        
levels of expenditure on research and development; personnel changes,           
particularly those involving engineering and technical personnel; costs         
associated with protecting the Company's intellectual property; changes in      
Company strategies; foreign exchange rate fluctuations or other changes in the  
international business climate; and general economic trends and other factors.  

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LIQUIDITY AND CAPITAL RESOURCES                                                 

Since inception, the Company has funded its operations primarily from       
approximately $58.3 million in contract payments (net of foreign withholding    
taxes) received through March 31, 1997, and to a lesser extent, the sale of     
approximately $21.4 million of convertible preferred stock and preferred stock  
purchase rights. At March 31, 1997, the Company had cash and cash equivalents   
and marketable securities of $10.5 million. As of March 31, 1997, the Company   
had an accumulated deficit of $34.1 million and negative working capital of     
$1.1 million, including a short-term component of deferred revenue of $17.9     
million. Deferred revenue represents the excess of cash received from           
licensees over revenue recognized on license contracts, and the short-term      
component represents the amount of this deferred revenue to be recognized over  
the next twelve months. Without the deferred revenue, working capital would     
have been a positive $16.8 million.                                             

The Company's operating activities used net cash of $1.8 million in fiscal  
1994, provided net cash of $1.3 million in fiscal 1995, used net cash of $3.5   
million in fiscal 1996 and provided net cash of $3.2 million in the first half  
of fiscal 1997. Cash used by operations in fiscal 1994 was due to the net       
loss, adjusted for non-cash items, offset by a decrease in accounts receivable  
and other assets and an increase in deferred revenue. Cash generated by         
operations in fiscal 1995 was primarily the result of an increase in deferred   
revenue offset by the net loss, adjusted for non-cash items and an increase in  
accounts receivable. Cash used by operations in fiscal 1996 was due to the net  
loss, adjusted for non-cash items, and a decrease in deferred revenue offset    
by a decrease in accounts receivable. Cash generated by operations in the       
first half of fiscal 1997 was primarily the result of an increase in deferred   
revenue offset by an increase in accounts receivable. Accounts receivable       
increased primarily as a result of amounts billed under two new license         
contracts entered into during the quarter ended March 31, 1997. The increase    
in deferred revenue at March 31, 1997 was primarily due to several new license  
contracts entered into by the Company subsequent to the last fiscal year end.   

Net cash used in investing activities was $3.6 million, $10.4 million and   
$3.0 million in fiscal 1994, fiscal 1995 and the first half of fiscal 1997,     
respectively; net cash provided by investing activities was $3.9 million in     
fiscal 1996. Investing activities have consisted primarily of net purchases of  
marketable securities and purchases of property and equipment. See Notes 2, 5,  
9 and 15 of Notes to Consolidated Financial Statements.                         

Net cash provided by financing activities were $4.5 million, $8.5 million   
and $307,000 in fiscal 1994, fiscal 1995 and the first half of fiscal 1997,     
respectively; net cash used in financing activities was $546,000 in fiscal      
1996. Financing activities have consisted primarily of sales of convertible     
preferred stock and preferred stock purchase rights offset by principal         
payments on capital leases. See Notes 2, 4 and 15 of Notes to Consolidated      
Financial Statements.                                                           

In the first six months of fiscal 1997, the Company incurred total costs and
expenses of approximately $10.9 million. The Company expects to incur total     
costs and expenses of at least this level over the next twelve months. In       
particular, the Company has incurred substantial expenditures related to the    
development and marketing of its technology. Future development and marketing   
of extensions of the Company's technology and further enhancements to the       
Company's original technology will require substantial additional funds. In     
addition, the Company anticipates spending at least $1.5 million for equipment  
lease and office lease payments and approximately $3.0 million for capital      
expenditures over the next 12 months. While the first two quarters of fiscal    
1997 were the Company's first profitable quarters, there can be no assurance    
that the Company will remain profitable in the future. See Notes 8 and 9 of     
Notes to Consolidated Financial Statements.                                     

The Company presently anticipates that the net proceeds from this offering, 
together with existing sources of liquidity and cash anticipated to be          
provided by operations, will be adequate to meet its cash needs for at least    
the next 12 months.                                                             

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BUSINESS  

The key elements of the Rambus interface are RDRAMs, RACs and the           
interconnecting circuitry known as the "Rambus Channel." The high-speed         
interface technology Rambus has developed is applicable to data transfer        
between most semiconductor chips. The Company has initially chosen to           
concentrate the application of its technology on the interface between logic    
ICs and memory devices because of the acute performance needs and the relevant  
market sizes. The Company believes that the systems which will best utilize     
the high bandwidth provided by current Rambus technology are the relatively     
high-volume, low-cost systems in which the cost of the memory subsystems        
represents a significant portion of the selling price. To date, the principal   
applications for the Company's technology have been in the consumer             
multimedia, PC multimedia and workstation multimedia markets. These areas       
accounted for the sale of approximately $13,000, $11 million and $447 million   
of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996,              
respectively. Although period-to-period changes in the Company's revenues are   
dependent upon numerous factors other than changes in sales of Rambus ICs,      
such as the structure of royalty arrangements with particular licensees, the    
level of prepaid royalties to be offset, the mix of royalty-bearing sales       
between RDRAMs and RACs and the one quarter lag time between sales by           
licensees and the receipt of royalties by the Company, the Company believes     
that increases in sales of Rambus ICs indicate the level of market acceptance   
of the Company's technology to date. Other applications currently being         
developed include multifunction peripheral controllers for combination          
fax/copier/scanner/laser printer devices, and networking equipment such as      
high-speed ethernet switches. In addition, the Company and Intel Corporation    
have entered into a development and license agreement and are working together  
to develop an extension of the Rambus interface technology optimized for the    
PC main memory market segment.                                                  

INDUSTRY BACKGROUND                                                             

Worldwide demand for semiconductor devices has increased significantly in   
recent years due to growth in the demand for electronic systems which use       
semiconductors, as well as an increase in the semiconductor content of these    
systems. According to industry sources, the worldwide market for                
semiconductors was estimated to be $137 billion in 1996, and is estimated to    
reach $290 billion by the year 2000.                                            

Among the factors that contribute to this growth are the reduced costs and  
increasing performance of home video games, PCs, workstations, servers and      
networking equipment, as well as the improving price/performance ratio of       
semiconductors themselves. For example, home video game consumers are           
requiring increasingly sophisticated color and 3D capabilities to match those   
available in large arcade machines. PC purchasers are increasingly demanding    
multimedia-equipped systems which support features such as full motion video,   
sophisticated 3D graphics, high-quality audio and images with greater color     
depth and higher resolution. The increased performance of PCs and the           
availability of sophisticated PC engineering and multimedia authoring           
applications are, in turn, driving manufacturers of workstations to develop     
even more sophisticated 3D graphics and other multimedia capabilities.          
Similarly, evolving network technology and infrastructure are driving the       
demand for performance improvements in servers and networking equipment.        
Systems manufacturers are under constant pressure to introduce enhanced         
capabilities and higher performance while keeping prices within reach of their  
target markets.                                                                 

The performance of a computer or other electronic system is typically       
constrained by the speed of its slowest element. In the past, that element was  
the logic IC that controlled the system's specific functions and performed      
calculations--the microprocessor. In recent years, however, new generations of  
microprocessors have become substantially faster and more powerful, and         
increasingly the bottleneck in system performance is becoming the component     
that stores the instructions and data needed by the microprocessor--the DRAM.   

Since 1980, the typical operating frequency of Intel and other mainstream   
microprocessors has increased approximately 40 times from 5 MHz (million        
cycles per second) to 200 MHz. During this same period, the typical operating   
frequency of a standard DRAM (known as a "page mode" DRAM) has increased by     
approximately five times. Even the evolutionary improvements to DRAM            
technology, including the FPM (fast-page mode) DRAM, the EDO (extended-data-    
out) DRAM, the SDRAM (synchronous DRAM) and the SGRAM                           

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(a version of the SDRAM for graphics applications), have only been able to      
provide an improvement of up to approximately ten times. This growing           
disparity between the frequency of microprocessors and DRAMs is termed the      
"Performance Gap."                                                              

[PERFORMANCE GRAPH]   

[Description of Graph: The graph omitted in the EDGAR filing consists of a  
horizontal axis representing years between 1980 and 1996, and a vertical axis   
representing frequencies in MHz. The graph contains data points for x86 MPU,    
SDRAMs, EDOs and Page Made DRAMs. The data points for each of these             
technologies which are plotted in the graph are set forth below. In the graph,  
the data points for each respective technology are connected to form a line.    

x86 MPU CLOCK FREQUENCY VS. DRAM DATA TRANSFER FREQUENCY        

Measuring                                                                       
Period           Page                                      X86                
(Year)           Mode         EDO           SDRAM          MPU                
---------         ----         ---           -----          ---                 
1980             5                                         5                
1981                                                       8                
1982                                                      10                
1983                                                                        
1984                                                      12                
1985                                                                        
1986             8                                        16                
1987                                                      20                
1988                                                      25                
1989            18                                        33                
1990                                                                        
1991            22                                        50                
1992                                                      66                
1993            25                                                          
1994            28                                       100                
1995                         40                          150                
1996            33           50             66           200                
-------                                                                         
(1)  The material in this description is not deemed filed with the Securities   
  and Exchange Commission, and is not to be incorporated by reference into
 any filing of the Company under the Securities Act of 1933, as amended,
 or the Securities Exchange Act of 1934, as amended, whether made before
or after the date hereof and irrespective of any general incorporation
language contained in any such filing.]                               

Sources--                                                                   

x86 MPU: Microprocessor Report                                              
 Page Mode DRAM, EDO DRAM: Micron, NEC, Texas Instruments, Toshiba data sheets
SDRAM: measured clock/data rate in Dell PC                                  

While microprocessors have undergone both manufacturing and architectural   
improvements, significant innovations for DRAMs have generally only occurred    
on the manufacturing side. DRAM manufacturers have been successful in           
increasing DRAM "density," or storage capacity, from roughly 1 Kbit (thousand   
bits) to 64 Mbits (million bits) per chip, thereby reducing the number of       
DRAMs required for a given amount of memory. However, corresponding             
architectural improvements necessary to increase DRAM data transfer rates to    
keep pace with increasing microprocessor speeds have not occurred.              

Systems manufacturers have attempted to bridge the Performance Gap with a   
variety of performance-enhancing techniques. One approach is the use of SRAMs   
(static RAMs), which are faster but more expensive than DRAMs, to build cache   
memories. SRAM caches are effective for applications which repeatedly access a  
particular set of data, such as scientific and spreadsheet applications, but    
are not as effective for multimedia and other applications that must            
continually access new data. For example, for a multimedia application to       
display real-time video that is perceived as smooth motion by the human eye, a  
new image must be decompressed, displayed and then discarded approximately 30   
times every second. Because such an application requires a high rate of         
transfer of constantly changing data and does not use data repetitively, SRAM   
caches do not provide an effective solution.                                    

Another technique used to address the Performance Gap, the "wide bus"       
approach, relies on increasing the width of the "bus," or channel, through      
which data is passed to and from the processor/controller and the DRAMs. A      
wider bus will transfer proportionately more data than a narrower bus. Just as  
the capacity of a highway can be increased by adding more lanes, bus width can  
be increased by adding more external                                            

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connections, or "pins." However, use of wider buses to increase the memory      
bandwidth creates several problems. First, the routing scheme for conventional  
DRAMs results in the wires on the printed circuit boards that have varying      
lengths and electrical loads that cause timing problems, known as "signal       
skew," as well as signal integrity problems. These problems become more         
pronounced with increases in pincount. Another problem inherent in wider buses  
is that larger pincount packages are more expensive to produce and require      
more expensive testers. Additionally, every pin on the package must connect to  
a bonding "pad" on the chip itself, typically at the edge of the chip. For      
smaller chips it may not be possible to put as many pads on the chip as is      
desired without increasing the die size and cost of the chip. Another problem   
relates to the number of DRAMs necessary to achieve the greater memory          
bandwidth associated with a wider bus. DRAM densities have been increasing      
rapidly and larger DRAMs typically have a lower cost per bit. For some          
applications, the most cost-effective solution for memory capacity may require  
only one or two DRAMs. However, limitations on the data transfer rate of a      
given DRAM often require that multiple DRAMs be used on a wide bus to provide   
sufficient memory bandwidth. By requiring more DRAMs to provide the desired     
memory bandwidth than are required to provide the desired memory capacity, the  
wide bus solution often results in the use of a greater number of smaller       
capacity DRAMs, which in turn results in a higher cost per bit.                 

Rambus believes that several major market trends will exacerbate the        
Performance Gap in the future. The increased number and performance of          
multimedia applications and other capabilities demanded by businesses and       
consumers require ongoing improvements in memory bandwidth, which Rambus        
believes cannot be achieved without significantly changing the DRAM interface   
architecture. The memory bandwidth required by current systems, such as home    
video games and PCs, can be hundreds of megabytes (million bytes) per second.   
These bandwidth requirements are already taxing, and in many cases exceeding,   
the limits of conventional DRAMs. The demand for memory bandwidth for PC main   
memory will soon exceed one gigabyte (billion bytes) per second due to          
continuing advances in microprocessor frequency, as well as software and        
architecture changes that shift much of the load for multimedia processing to   
the main memory subsystem. Rambus believes that these market trends have        
created a significant opportunity for a high-speed, cost-effective, scalable    
solution that addresses the widening Performance Gap.                           

THE RAMBUS SOLUTION                                                             

Rambus has created a revolutionary chip-to-chip interface architecture,     
which allows data to be transferred through a simplified bus at significantly   
higher frequencies than permitted by conventional technologies. Rambus has      
focused the application of its interface technology on the Performance Gap and  
licenses its interface technology to memory and logic semiconductor             
manufacturers, which incorporate this interface technology into their IC        
designs to supply systems companies with Rambus ICs. The key elements of the    
Rambus interface are RDRAMs, RACs and the interconnecting circuitry known as    
the "Rambus Channel." While Rambus technology can be used to address a wide     
variety of chip-to-chip data transfer requirements, the largest immediate       
application is to connect logic circuits to memory in home video games, PCs,    
workstations and other electronic systems.                                      

Key benefits of the Rambus solution are:                                    

High Performance. Rambus interface technology currently allows data         
transfers of up to 600 megabytes per second between a logic IC and DRAMs by     
transferring data at a frequency of 600 MHz over a byte-wide bus known as the   
"Rambus Channel." System performance can be further enhanced by applying        
Rambus interface technology to multiple channels on a logic IC. For example, a  
Rambus-based logic IC can utilize four channels to achieve data transfer of up  
to 2.4 gigabytes per second. In addition, multiple DRAMs can be connected to    
each channel on a Rambus-enabled logic device to increase memory capacity.      
Rambus maintains ongoing research and development activities in conjunction     
with its licensees to further improve the performance of its interface          
technology.                                                                     

Open Standard. Rambus interface technology is an open standard, with        
compatible Rambus ICs available to systems companies from any IC manufacturer   
that has obtained a license from Rambus. Rambus believes that systems           
companies benefit from having compatible Rambus ICs and a consistent            
implementation of the Rambus                                                    

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interface technology, available from multiple sources. Rambus also believes     
that making its technology available from established DRAM and logic IC         
companies facilitates the adoption of Rambus technology by systems companies.   

Cost-Effectiveness. Rambus technology can enable systems companies to       
significantly improve system cost-effectiveness. Depending on the               
implementation, Rambus technology allows a reduction in the number of pins per  
logic device, the use of fewer DRAMs of greater density, a simplified circuit   
board design and layout and a smaller circuit board. According to a recent      
study by an independent research organization, Rambus enables the lowest-cost   
2 megabyte frame buffer DRAM alternative to traditional page mode DRAMs.        

Complete Systems Solution. Rambus' solution is based on a system-wide,      
rather than a chip-level, perspective. Semiconductor companies have             
traditionally attempted to improve chip-level performance by increasing the     
"width," or number of pins, associated with a given DRAM, but this tends to     
increase the size, cost and complexity of the overall system. In contrast,      
Rambus has successfully increased memory bandwidth per pin, thereby increasing  
performance gains and cost savings when its technology is incorporated into a   
home video game, PC, workstation or other electronic system. As part of its     
complete systems solution approach, Rambus provides technical support to        
systems companies that incorporate Rambus technology into their products.       

TARGET MARKETS AND APPLICATIONS                                                 

The high-speed interface technology Rambus has developed is applicable to   
data transfer between most semiconductor chips. The Company has initially       
chosen to concentrate the application of its technology on the interface        
between logic ICs and memory devices because of the acute performance needs     
and the relevant market sizes. According to industry sources, the total market  
for DRAMs was estimated to be over $25 billion in 1996 and is expected to grow  
to over $62 billion in 2000. While Rambus interface technology is useful in     
providing increased memory bandwidth in any electronic system, the Company      
believes that the systems which will best utilize the high bandwidth provided   
by current Rambus technology are the relatively high-volume, low-cost systems   
in which the cost of the memory subsystems represents a significant portion of  
the selling price. To date, the principal applications for the Company's        
technology have been in the consumer multimedia, PC multimedia and workstation  
multimedia markets. These areas accounted for the sale of approximately         
$13,000, $11 million and $447 million of Rambus ICs by Rambus licensees in      
calendar 1994, 1995 and 1996, respectively. Although period-to-period changes   
in the Company's revenues are dependent upon numerous factors other than        
changes in sales of Rambus ICs, such as the structure of royalty arrangements   
with particular licensees, the level of prepaid royalties to be offset, the     
mix of royalty-bearing sales between RDRAMs and RACs and the one quarter lag    
time between sales by licensees and the receipt of royalties by the Company,    
the Company believes that increases in sales of Rambus ICs indicate the level   
of market acceptance of the Company's technology to date. The Company believes  
significant opportunities to expand adoption of its technology exist in the PC  
main memory market segment and other markets.                                   

MULTIMEDIA/GRAPHICS                                                           

The first generation of Rambus ICs has been targeted at consumer multimedia,
PC multimedia and workstation multimedia because these are the applications     
which the Company believes are in most immediate need of the performance        
improvements that can be enabled by an increase in memory bandwidth. The        
Company also believes that systems running these applications, particularly     
high-volume, low-cost consumer electronics and PC multimedia systems, will      
benefit most from the significant improvement in the price/performance ratio    
that is enabled by Rambus technology.                                           

Consumer Multimedia. Manufacturers of consumer multimedia products, such as 
home video games, are under constant competitive pressure to provide more       
sophisticated graphics and other multimedia features at low cost. Rambus        
believes that its interface technology provides consumer multimedia systems     
companies with a competitive advantage in meeting this challenge. Nintendo,     
Inc.'s new Nintendo 64 video game uses Rambus                                   

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interface technology to deliver sophisticated 3D graphics and CD-quality audio  
at a retail selling price of less than $150. The high bandwidth delivered by    
RDRAMs enables the creation of a unified system and graphics memory subsystem.  
The Nintendo 64 began selling in June 1996 in Japan and in September 1996 in    
the United States, and had sold approximately 4 million units through the end   
of calendar 1996.                                                               

PC Multimedia. Similarly, PC manufacturers are striving to meet market      
demand for increased multimedia performance at low cost. One aspect of this     
demand is the shift from 2D to 3D capability, and an independent research       
organization has estimated the market for 3D graphics controllers will grow     
from over 7 million units in 1996 to over 120 million in 2000. In September     
1996, Cirrus Logic began commercial shipments of its Laguna graphics            
controller, the first product in a planned family of VisualMedia PC graphics    
controllers using Rambus memory interface technology. The Laguna graphics       
controller has been adopted by Creative Labs, Inc. and others for use in add-   
in graphics accelerator cards for the PC market. Another Rambus licensee,       
Chromatic Research, Inc., has introduced a line of multimedia processors        
called Mpact. Chromatic has licensed Toshiba Corporation, LG Semicon Co., Ltd.  
and SGS-THOMSON Microelectronics, Inc., all of which are Rambus licensees, to   
build and sell these Rambus-based processors.                                   

In August 1996, Microsoft Corporation published its "Talisman" PC reference 
design, which includes Rambus interface technology. Talisman is a set of        
technology specifications promulgated by Microsoft to allow multimedia PC       
systems running Microsoft software to provide multimedia performance            
previously available only on workstations. Rambus believes that this is a       
significant endorsement of its technology, although to date no commercial       
applications of Talisman have been announced or released and there is no        
assurance that any product will ever be developed based on this reference       
design or that any products developed will include Rambus interface             
technology.                                                                     

Workstation Multimedia. Rambus interface technology significantly enhances  
the multimedia performance of workstations in a cost-effective manner. The      
first application of Rambus technology was the Impact line of 3D graphics       
controllers for workstations from Silicon Graphics, Inc. ("SGI"). SGI uses      
Rambus technology in the 3D graphics subsystem to help bring high-performance,  
high-quality graphics to entry-level workstations. Each subsystem uses a        
minimum of six RDRAMs and three Rambus-enabled logic ICs to achieve peak        
bandwidth of 3 gigabytes per second.                                            

PC MAIN MEMORY                                                                

A key element of the Company's strategy is to penetrate the market segment  
for main memory in PCs. Industry sources estimate that over 72 million PCs      
were sold in 1996 and that demand will grow to over 130 million units by 2000.  
The Company believes that approximately half of all DRAMs are currently used    
in PC main memory applications.                                                 

Development with Rambus Licensees. Rambus and a majority of its DRAM        
licensees are currently developing an advanced version of next-generation 64    
Mbit RDRAMs which will be targeted at the PC main memory market segment. The    
Company believes that these devices will offer superior bandwidth compared to   
other solutions for PC main memory applications. These devices are not          
scheduled for mass production until at least 1999, and there can be no          
assurance that such devices will be successfully developed or that, if          
developed, will be successful in penetrating the market segment for PC main     
memory. See "Risk Factors--Dependence upon Limited Number of Licensees" and     
"--Future Dependence upon PC Main Memory Market Segment and Intel."             

Intel Contract. In November 1996, Rambus entered into a development and     
license contract with Intel. The contract provides for the parties to           
cooperate in the development of a specification for the RDRAM to be developed   
by Rambus and its DRAM licensees which will be optimized for PC main memory     
applications. The contract also calls for Intel to use reasonable best efforts  
to develop a PC main memory controller designed for use with these RDRAMs.      
There can be no assurance that such a controller will be designed in time to    
meet                                                                            

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market requirements or that the parties will be successful in specifying an     
RDRAM that will be built by Rambus licensees at all or in sufficient quantity   
to become a standard for PC main memory. See "Risk Factors--Future Dependence   
upon PC Main Memory Market Segment and Intel" and "Certain Transactions--Intel  
Contract."                                                                      

OTHER                                                                         

The Company believes that its technology, which enables high memory         
bandwidth at low cost, is well suited to a broad range of other applications.   
Other Rambus-based applications currently being developed include               
multifunction peripheral controllers for use in combination                     
fax/copier/scanner/laser printer applications and networking equipment such as  
high-speed ethernet switches. There can be no assurance that such devices will  
be designed incorporating Rambus interface technology or that sales of such     
devices will be meaningful.                                                     

RAMBUS LICENSEES                                                                

Rambus licenses its technology on a nonexclusive and worldwide basis to     
semiconductor manufacturers which sell Rambus ICs to systems companies that     
have adopted Rambus technology. An important element of the Company's strategy  
is to license its technology broadly in order to establish Rambus interface     
technology as a standard and to provide systems companies with sources from     
established semiconductor companies for Rambus ICs. Rambus provides licenses    
to both DRAM manufacturers and logic IC manufacturers, which can license        
Rambus interface technology for use in producing RDRAMs and/or logic ICs        
containing RACs. At March 31, 1997, Rambus had a total of 20 licensees. To      
date, a majority of the Company's royalties has been derived from the sale of   
logic ICs incorporating RACs. If the Company is successful in its strategy to   
penetrate the PC main memory market, the Company expects that royalties from    
the sale of RDRAMs will eventually account for the largest portion of           
royalties.                                                                      

Sales of Rambus ICs to systems companies, such as manufacturers of home     
video games, PCs, workstations and graphics boards, are not made by Rambus,     
but by semiconductor companies which are the Company's licensees. Systems       
companies do not need a license to incorporate Rambus ICs in their products.    
However, an important part of the Company's strategy is to maintain close ties  
to these systems companies to encourage the adoption of Rambus technology. See  
"Risk Factors--Dependence upon Limited Number of Licensees," "--Dependence      
upon Systems Companies," "--No Assurance of Adoption of Rambus Technology as    
an Industry Standard" and "Business--Target Markets and Applications."          

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RDRAM LICENSEES                                                               

The DRAM business is highly competitive, with approximately 20 major        
manufacturers located throughout the world. Rambus' licensees include nine      
DRAM manufacturers which collectively accounted for over 70% of worldwide DRAM  
sales in calendar 1996. The Company's RDRAM licensees include:                  

                                                        [Enlarge/Download Table]

         RAMBUS           DATE OF INITIAL                                                
        LICENSEE           RDRAM LICENSE               STATUS OF DEVELOPMENT             
        --------          ---------------              ---------------------             
                                                                                         
Hitachi, Ltd.             September 1994  64 Mbit RDRAM in development.                  
Hyundai Electronics       December 1995   16/18 Mbit and 64 Mbit RDRAMs in development.  
 Industries Co., Ltd.                                                                    
LG Semicon Co., Ltd.      February 1994   16/18 Mbit RDRAMs beginning production. 64 Mbit
                                          RDRAM in development.                          
Micron Technology, Inc.   March 1997      64 Mbit RDRAM commencing development.          
Mitsubishi Electric Co.   February 1997   64 Mbit RDRAM commencing development.          
Monolithic System         December 1996   Specialized 16 Mbit multi-bank RDRAMs          
 Technology, Inc.                         in development.                                
 ("MoSys")                                                                               
NEC Corporation           July 1991       16/18 Mbit RDRAMs in production. 64 Mbit       
                                          RDRAM in development.                          
Oki Electric Industry     December 1993   16/18 Mbit RDRAMs beginning production. 64 Mbit
 Co., Ltd.                                RDRAM in development.                          
Samsung Electronics Co.,  December 1994   16/18 Mbit and 64 Mbit RDRAMs in development.  
 Ltd.                                                                                    
Toshiba Corporation       October 1990    16/18 Mbit RDRAMs in production. 64 Mbit       
                                          RDRAM in development.                          

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LOGIC IC LICENSEES                                                            

A Rambus license for logic ICs may be for all uses, or may be restricted to 
certain types of ICs such as ASICs or peripherals. Many of the RACs provided    
by Rambus for use in logic ICs have been developed first for a 0.5^ (micron,    
one millionth of a meter) process and then migrated to a 0.35^ process. In      
addition, the Company is currently working with certain licensees on 0.25^      
RACs. Information regarding certain of the Company's logic IC licensees is      
provided in the table below.                                                    

                                                                [Download Table]

         RAMBUS          DATE OF INITIAL                                            
        LICENSEE         LOGIC IC LICENSE            STATUS OF DEVELOPMENT          
        --------         ----------------            ---------------------          
                                                                                    
Chromatic Research, Inc. February 1994    Multimedia processors developed by        
                                          Chromatic are manufactured and sold by LG 
                                          Semicon and Toshiba. SGS-THOMSON is also  
                                          developing a multimedia processor based on
                                          a Chromatic design.                       
Cirrus Logic Inc.        October 1993     Graphics controllers in production.       
IBM Corporation          December 1995    Logic chip in development for third party 
                                          customer of ASIC design and foundry       
                                          services. RAC available as part of cell   
                                          library.                                  
Intel Corporation        November 1996    Main memory controller to be developed.   
LG Semicon Co., Ltd.     February 1994    Multimedia processor in production.       
LSI Logic Corporation    June 1994        RAC available as part of its cell library.
NEC Corporation          July 1991        Logic chip in production for third party  
                                          customer of ASIC design and foundry       
                                          services. RAC available as part of cell   
                                          library.                                  
SGS-THOMSON              December 1996    Multimedia processor in development.      
 Microelectronics, Inc.                                                             
Toshiba Corporation      October 1990     Multimedia processor in production. Logic 
                                          chip in development for third party       
                                          customer of ASIC design and foundry       
                                          services. RAC available as part of cell   
                                          library.                                  

In addition to the licensees named in the two tables above, Rambus has other
licensees who are developing proprietary products using Rambus technology and   
have chosen to keep their relationships with Rambus confidential until such     
products are introduced to the market.                                          

While all current RDRAM and certain current logic IC licensees have         
fabrication facilities, some current and potential future logic licensees use   
third-party fabrication facilities. The Company has developed a version of its  
RAC for manufacture at Taiwan Semiconductor Manufacturing Company Limited       
("TSMC"), one of the world's largest independent foundries. While not a Rambus  
licensee itself, TSMC will be able to manufacture Rambus-based ICs for fabless  
Rambus licensees.                                                               

RAMBUS BUSINESS MODEL AND STRATEGY                                              

In order to establish Rambus interface technology as an industry standard,  
the Company has adopted an innovative business model in which it neither        
manufactures nor sells semiconductors incorporating the Company's technology.   
The Company licenses its technology on a nonexclusive and worldwide basis to    
semiconductor companies which manufacture and sell RDRAMs and logic ICs         
containing RACs to systems companies which have adopted Rambus technology.      
Systems companies are not required to obtain a Rambus license to incorporate    
Rambus ICs into their products.                                                 

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The Rambus business model and strategy are designed to promote Rambus as an 
industry standard and are based on the following key elements:                  

Target Leading Systems Companies in Multiple Large Markets. The Company     
targets leading systems companies in markets that the Company believes          
represent the greatest potential for Rambus IC sales. The Company believes      
that making these market leaders successful in their adoption of Rambus         
technology will not only validate the Rambus technology as a practical,         
performance-enhancing and cost-effective solution, but will also place          
competitive pressure on other industry participants to adopt Rambus             
technology. The Company actively participates with its licensees in their       
marketing and selling efforts to systems companies, develops applications       
notes and other technical material to promote and support Rambus technology in  
the marketplace, and provides technical support, generally at no charge, to     
systems companies which have adopted Rambus technology. Leading systems         
companies which have adopted Rambus technology to date include Nintendo in the  
home video game market and SGI in the workstation market. Additionally, Rambus  
seeks to establish relationships with leading technology providers, such as     
Intel, Microsoft and Cirrus Logic, whose technologies have been or are          
expected to become widely adopted by systems companies. See "--Target Markets   
and Applications."                                                              

Provide Multiple Sources for RDRAMs. The Company licenses its technology    
broadly in order to provide systems companies with multiple sources for         
RDRAMs. For example, the Company's licensees include nine separate DRAM         
manufacturers which collectively represented over 70% of total worldwide DRAM   
sales in calendar 1996. The Company's license contracts generally require a     
licensee to develop a Rambus IC in order to keep its license. The Company       
believes that systems companies will be more inclined to adopt Rambus           
interface technology if it is available from established DRAM manufacturers     
with which systems companies already have relationships. The Rambus business    
model ensures the compatibility of all Rambus ICs and a consistent              
implementation of the Rambus interface technology, regardless of manufacturer.  

Leverage Business Model by Sharing Research and Development Efforts with    
Licensees. Rambus believes that cooperative development efforts with its        
licensees allow the Company to improve its interface technology and bring it    
to market faster, cheaper and with broader support than would be possible if    
Rambus were to attempt to develop, manufacture or sell chips incorporating the  
Rambus interface technology on its own. While all the development of the        
fundamental technology and much of the specific process implementation has      
been done by Rambus, a significant portion of the specific process              
implementation has been accomplished by the partner licensees. By spreading     
the cost of developing Rambus technology among all Rambus licensees, which      
Rambus considers to be its partners in development, the Rambus business model   
permits the Company to maintain a relatively low cost structure and devote a    
relatively large portion of its resources to research and development efforts   
which are directly related to the Company's fundamental technology.             

Generate Revenue through a Combination of Contract Fees and                 
Royalties. Licensees generally pay a license fee to Rambus ranging from a few   
hundred thousand dollars for a narrow license covering a single logic product   
to millions of dollars for a license with broad coverage of Rambus technology.  
Part of these fees may be due upon the achievement of certain milestones, such  
as provision of certain deliverables by Rambus or production of chips by the    
licensee. In a few cases, the Company has received nonrefundable, prepaid       
royalties which will offset the earliest royalties due from the licensee.       
Rambus' contracts also typically provide for engineering service fees, which    
help pay the cost of developing the core technology. Licensees normally pay     
additional engineering service fees if Rambus provides the modification of its  
interface technology required for the licensee's specific chip manufacturing    
process. All Rambus license fees and engineering service fees are               
nonrefundable.                                                                  

Royalties, which are generally a percentage of the revenues received by     
licensees on their sales of Rambus ICs, are normally payable by a Rambus        
licensee on sales occurring during the life of the Rambus patents being         
licensed. For a typical systems application of Rambus technology, the Company   
receives royalties from the sale of both logic ICs containing RACs and RDRAMs   
as they are shipped by Rambus licensees. Royalty rates range up to a maximum    
of approximately 2.5% for RDRAMs and a maximum of approximately 5% for logic    
ICs, and                                                                        

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in some cases may decline based on the passage of time or on the total volume   
of Rambus ICs shipped. The exact rate and structure of a royalty arrangement    
with a particular licensee depend on a number of factors, including the amount  
of the license fee to be paid by the licensee and the marketing and             
engineering commitment made by the licensee.                                    

Contract fees have provided the majority of the capital needed to date by   
the Company to develop its fundamental technology, and the Company believes     
that its business model is well suited to continue funding future development.  
However, there is no assurance that the Company's current partner licensees     
will generate revenue, or that the Company will be able to add new license      
contracts in the future, at levels sufficient to provide significant funding    
for further development activities. See "Management's Discussion and Analysis   
of Financial Condition and Results of Operations."                              

Maintain Technology Leadership. Rambus has pioneered a unique and           
revolutionary solution to the Performance Gap. Rambus believes that the         
factors which created this opportunity, including the accelerating              
improvements in microprocessor speeds and DRAM densities and business and       
consumer demand for ever increasing performance at lower cost, will continue    
to require innovative technology. The Company is committed to continuing        
research and development efforts, both internally and in conjunction with its   
partner licensees, to further improve the Rambus interface technology.          
Approximately three quarters of the Company's employees have technical          
degrees, and more than half of the Company's employees have graduate technical  
degrees. The Company plans to continue its emphasis on research and             
development, and currently more than half of the Company's engineering staff    
is assigned to developing future generations of the Company's fundamental       
technology.                                                                     

Pursue System-Level Approach. The Company believes that the value of its    
technology to systems companies as a cost-effective way to improve system       
performance is a result of the Company's system-level approach. Rather than     
focusing exclusively on chip-level improvements, the Company designs its        
technology with the goal of improving the overall performance and cost          
effectiveness of systems such as home video games, PCs and workstations which   
incorporate the technology. Rambus intends to continue this approach in its     
future development efforts.                                                     

TECHNOLOGY AND PRODUCTS                                                         

ARCHITECTURE                                                                  

Rambus has developed a revolutionary chip-to-chip interface technology which
combines a new bus architecture with major improvements in signaling            
technology. Unlike other approaches, address, data and control information is   
transferred together through a relatively narrow bus between a RAC and one or   
more RDRAMs. To achieve a high bandwidth over the narrow bus, Rambus developed  
a protocol for moving data rapidly and efficiently. To eliminate signal skew,   
clock and data signals are sent in parallel over a precisely defined and        
controlled route. Rambus' technological innovations, including the use of low   
signal swings, data transfer on both edges of a synchronizing clock pulse and   
the use of on-chip compensation circuits, all contribute to achieving a peak    
memory bandwidth of 600 megabytes per second per channel. The Company believes  
that its technology is scalable, and that higher peak bandwidths can be         
achieved in the future.                                                         

The Company and its licensees are developing an extension of Rambus         
interface technology, scheduled for introduction in mid-1997 and called         
"Concurrent Rambus" technology, for both 16/18 Mbit and 64 Mbit generation      
RDRAMs, which will provide more efficient use of the high peak bandwidth        
currently provided by the base technology for graphics and multimedia           
applications. In addition, Rambus and Intel are currently working on the        
definition of another extension to the Rambus interface technology, scheduled   
for introduction in late 1998 and called "Direct Rambus" technology, for 64     
Mbit generation RDRAMs, which will be further optimized for PC main memory      
applications.                                                                   

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RAMBUS DESIGN METHODOLOGY                                                     

When developing either a generalized layout database for a new product or an
optimized implementation for a specific process, Rambus designers apply a       
rigorous design methodology intended to accelerate the development process,     
maintain consistent quality and promote the development and sharing of design   
expertise among the engineering staff. Rambus design engineers generally use a  
common set of third-party and custom computer aided design tools on a network   
of computer workstations in order to allow them to share common resources. The  
Company has developed proprietary software to assist in the modeling,           
simulation, layout and verification of circuit designs. Additionally, the       
Company promotes design integrity and sharing of expertise by subjecting        
designs to a series of peer reviews and simulation and verification tests at    
different stages of development. When a process-specific design has been        
developed by Rambus, each implementation in silicon is generally tested by the  
Company on high-speed testers in order to verify the device against the design  
specifications.                                                                 

LICENSEE DESIGN METHODOLOGY                                                   

Rambus interface technology has been developed to allow semiconductor       
companies to use familiar, widely-available design tools and conventional       
techniques when designing their Rambus-enabled chips. A new Rambus licensee     
receives an implementation package from the Company which contains all the      
information needed to develop a Rambus IC in the licensee's process. There are  
separate implementation packages for RDRAMs and for RACs. An implementation     
package includes a specification, a generalized circuit layout database         
software for the particular version of the RDRAM or RAC which the licensee      
intends to develop, test parameter software and, for RDRAMs, a DRAM core        
interface specification. Many licensees have contracted to have Rambus produce  
the specific implementation required to optimize the generalized circuit        
layout for the licensee's manufacturing process. In such cases, the licensee    
provides specific design rules and transistor models which Rambus designers     
use to integrate RDRAM or RAC circuits into the licensee's process. However,    
Rambus anticipates that as licensees become more familiar with the Rambus       
technology, they will be able to do more of the implementation work without     
Rambus' assistance.                                                             

MANUFACTURING AND YIELDS                                                      

Rambus has developed its technology to be manufacturable using familiar,    
industry-standard CMOS semiconductor processes. For this reason the Company     
believes that the wafer fabrication yields of RDRAMs and logic products         
containing RACs are consistent with those for similar products in the same      
manufacturing facility. However, because of the extra Rambus interface          
circuitry, an RDRAM chip is somewhat larger than a standard DRAM. Therefore, a  
manufacturer will generally produce fewer RDRAMs than standard DRAMs for a      
given wafer size and an RDRAM chip will be somewhat more expensive than the     
standard version. Rambus believes that this cost premium is about 10% to 20%    
for the current 16 Mbit generation, but will be reduced to about 5% for 64      
Mbit RDRAMs. In addition, RDRAM manufacturers are responsible for their own     
manufacturing processes and Rambus has no role in the manufacture of RDRAMs.    
For example, Rambus has no influence on decisions in regard to any process      
changes or on whether or when to "shrink" or otherwise change a design to       
reduce the cost of the chips.                                                   

PACKAGING AND CIRCUIT BOARD LAYOUT                                            

Current implementations of RDRAMs and Rambus logic ICs can be packaged in   
widely available, inexpensive packaging. System companies connect RDRAMs to     
Rambus logic ICs using normal printed circuit board ("PCB") materials and       
manufacturing techniques. System companies are provided with detailed           
specifications from Rambus on circuit board layout and construction. Circuit    
boards can be fabricated and assembled using standard PCB techniques and        
equipment.                                                                      

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RESEARCH AND DEVELOPMENT                                                        

The ability of the Company to compete in the future will be substantially   
dependent on its ability to advance its interface technology in order to meet   
changing market needs. To this end, Company engineers are involved in           
developing new versions of the Rambus interface technology which will allow     
chip-to-chip data transfer at higher speeds as well as provide other            
improvements. The Company has assembled a team of highly skilled engineers      
whose activities are focused on further development of Rambus interface         
technology as well as adaptation of current technology to specific licensees'   
processes. Because of the complexity of these activities, the design and        
development process at Rambus is a multi-disciplinary effort requiring          
expertise in computer architecture, digital and analog circuit design and       
layout, DRAM and logic semiconductor process characteristics, packaging, PCB    
routing and high-speed testing techniques.                                      

As of December 31, 1996, Rambus had 75 employees in the engineering         
department. Approximately two thirds of these employees have advanced           
technical degrees. In fiscal 1994, 1995 and 1996 and the first half of fiscal   
1997, research and development expenses were approximately $3.1 million, $3.1   
million, $5.2 million and $4.4 million, respectively. In addition, because the  
Company's license agreements often call for engineering support by Rambus, a    
substantial portion of the Company's total engineering costs has been           
allocated to cost of contract revenues, even though these engineering efforts   
have direct applicability to Rambus' technology development. The Company        
expects that it will continue to invest substantial funds on research and       
development activities. Currently, more than half of the Company's technical    
staff is primarily focused on the development of technologies which are not     
currently in production. There can be no assurance that new versions of the     
Rambus interface technology can be developed and introduced by the Company's    
licensees in a timely fashion or that such new technology will be accepted by   
the market. Moreover, the end markets for the Company's technology,             
particularly the home video game and PC markets, are subject to rapid           
technological change and there can be no assurance that as such markets change  
the Company's interface technology will remain current and suitable.            

COMPETITION                                                                     

The semiconductor industry is intensely competitive and has been            
characterized by price erosion, rapid technological change, short product life  
cycles, cyclical market patterns and increasing foreign and domestic            
competition. Most major DRAM manufacturers are developing higher-frequency      
versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with    
RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well    
as other major DRAM manufacturers such as IBM and Texas Instruments Inc. Most   
of these companies are much larger and have better access to financial,         
certain technical and other resources than Rambus. Additional high-speed DRAMs  
have recently been introduced by other semiconductor companies for specialized  
applications.                                                                   

The Company believes that its success in establishing a new high-speed      
memory interface has been due to the systems approach it has taken to solving   
the application needs of companies in home video game, PC and other electronic  
systems businesses. However, the Company believes competitors have begun to     
take a similar approach. The Company believes that its principal competition    
may come from its licensees and prospective licensees, many of which are        
evaluating and developing products based on alternative technologies. Many      
DRAM suppliers have indicated that they are developing a new technology called  
Double Data Rate ("DDR") SDRAMs, aimed at doubling the memory bandwidth from    
SDRAMs without increasing the clock frequency. In addition, a consortium        
including both large DRAM manufacturers and systems companies is promoting a    
specification for an alternative high-speed interface standard called           
SyncLink. To the extent that these alternative technologies provide comparable  
system performance at lower cost than RDRAMs, or do not require the payment of  
comparable royalties, the Company's licensees and prospective licensees may     
adopt and promote the alternative technologies. There can be no assurance that  
the Company's future competition will not have a material adverse effect on     
the Company's business, financial condition and results of operations. In       
addition, certain semiconductor companies have recently introduced a new kind   
of IC which combines logic and DRAM on the same chip. Such chips, called        
"embedded DRAM," eliminate the need for any chip-to-chip interface and are      
primarily being used for graphics applications. Embedded DRAMs are well suited  
for applications where                                                          

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component space saving and power consumption are important, such as in the      
graphics subsystems of notebook PCs. There can be no assurance that             
competition from embedded DRAMs will not increase in the future.                

PATENTS AND INTELLECTUAL PROPERTY PROTECTION                                    

The Company has an active program to protect its proprietary technology     
through the filing of patents. At March 31, 1997, the Company held 30 United    
States patents on various aspects of its technology, with expiration dates      
ranging from 2010 to 2014. At March 31, 1997, the Company had applications for  
37 United States patents pending. The Company's United States patents do not    
prevent the manufacture or sale of Rambus-based ICs abroad. At March 31, 1997,  
the Company held six foreign patents and had additional foreign patent          
applications pending in Taiwan, Korea, Japan and various other jurisdictions.   
There can be no assurance that the Company's pending United States or foreign   
patent applications or any future United States or foreign patent applications  
will be approved, that any issued patents will protect the Company's            
intellectual property or will not be challenged by third parties, or that the   
patents of others will not have an adverse effect on the Company's ability to   
do business. Furthermore, there can be no assurance that others will not        
independently develop similar or competing technology or design around any      
patents that may be issued to the Company.                                      

The Company attempts to protect its trade secrets and other proprietary     
information through agreements with licensees and systems companies,            
proprietary information agreements with employees and consultants and other     
security measures. The Company also relies on trademarks and trade secret laws  
to protect its intellectual property. Despite these efforts, there can be no    
assurance that others will not gain access to the Company's trade secrets, or   
that the Company can meaningfully protect its intellectual property. In         
addition, effective trade secret protection may be unavailable or limited in    
certain foreign countries. Although the Company intends to protect its rights   
vigorously, there can be no assurance that such measures will be successful.    

Rambus believes that it is important to develop and maintain a uniform RDRAM
memory interface standard. The Company's contracts generally prevent a          
licensee from using licensee-developed patented improvements related to Rambus  
technology to block other licensees from using the improvements or requiring    
them to pay additional royalties related to their use of Rambus interface       
technology. Specifically, the contracts generally require licensees to grant    
to Rambus a royalty-free cross-license on patented licensee intellectual        
property related to the implementation of Rambus interface technology, which    
Rambus sublicenses to other licensees which have entered into similar           
arrangements. Not all licensees have granted Rambus cross-licenses and there    
is no assurance that such a blocking arrangement will not occur in the future.  

The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. While the Company has not        
received formal notice of any infringement of the rights of any third party,    
questions of infringement in the semiconductor field involve highly technical   
and subjective analyses. Litigation may be necessary in the future to enforce   
the Company's patents and other intellectual property rights, to protect the    
Company's trade secrets, to determine the validity and scope of the             
proprietary rights of others, or to defend against claims of infringement or    
invalidity, and there can be no assurance that the Company would prevail in     
any future litigation. Any such litigation, whether or not determined in the    
Company's favor or settled by the Company, would be costly and would divert     
the efforts and attention of the Company's management and technical personnel   
from normal business operations, which would have a material adverse effect on  
the Company's business, financial condition and results of operations. Adverse  
determinations in litigation could result in the loss of the Company's          
proprietary rights, subject the Company to significant liabilities, require     
the Company to seek licenses from third parties or prevent the Company from     
licensing its technology, any of which could have a material adverse effect on  
the Company's business, financial condition and results of operations.          
Moreover, the laws of certain foreign countries in which the Company's          
technology is or may in the future be licensed may not protect the Company's    
intellectual property rights to the same extent as the laws of the United       
States, thus increasing the possibility of infringement of the Company's        
intellectual property.                                                          

In any potential dispute involving the Company's patents or other           
intellectual property, the Company's licensees could also become the target of  
litigation. While the Company generally does not indemnify its                  

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licensees, some of its license agreements require the Company to provide        
technical support and information to a licensee which is involved in            
litigation involving use of Rambus technology. The Company is bound to          
indemnify certain licensees under the terms of certain license agreements, and  
the Company may agree to indemnify others in the future. The Company's support  
and indemnification obligations could result in substantial expenses to the     
Company. In addition to the time and expense required for the Company to        
supply such support or indemnification to its licensees, a licensee's           
development, marketing and sales of Rambus ICs could be severely disrupted or   
shut down as a result of litigation, which in turn could have a material        
adverse effect on the Company's business, financial condition and results of    
operations.                                                                     

SALES AND MARKETING                                                             

Consistent with the Company's business model, sales and marketing activities
are focused on developing relationships with potential licensees and on         
participating with existing licensees in marketing, sales and technical         
efforts directed to systems companies. In many cases, Rambus must dedicate      
substantial resources to market to and support systems companies. The           
Company's sales and marketing efforts include applications engineering and      
other technical support for systems companies, as well as trade shows,          
advertising and other traditional marketing activities.                         

EMPLOYEES                                                                       

As of December 31, 1996 the Company had 108 employees, including three in   
Japan. Of this total, 75 were in engineering, 21 were in marketing and sales,   
and 12 were in finance and administration. Overall, approximately three         
quarters of the Company's employees have technical degrees, and more than half  
of the Company's employees have advanced technical degrees. The Company's       
future success will largely be dependent on its ability to attract, retain and  
motivate highly qualified technical and management personnel who are in great   
demand in the semiconductor industry. The Company's employees are not           
represented by any collective bargaining agreements and the Company has never   
experienced a work stoppage. The Company believes that its employee relations   
are good.                                                                       

FACILITIES                                                                      

The Company leases approximately 31,000 square feet in one building in      
Mountain View, California for its principal engineering, marketing and          
administrative operations. The lease expires in February 2005, with an option   
to extend the lease for an additional five years. The Company also leases       
space in Tokyo for an office which provides sales and technical support to      
systems companies in Japan. The Company expects that it will be required to     
seek additional space to support operations within the next twelve months and   
believes that it will not have difficulty in securing such additional           
facilities.                                                                     

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MANAGEMENT  

EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL                                 

The executive officers, directors and key personnel of the Company, and     
their ages and positions as of March 31, 1997, are as follows:                  

                                                        [Enlarge/Download Table]

          NAME           AGE                              POSITION                             
          ----           ---                              --------                             
                                                                                               
Geoff Tate(1)...........  42 President, Chief Executive Officer and Director                   
Gary Harmon.............  59 Vice President, Finance, Chief Financial Officer and Secretary    
Ed Larsen...............  44 Vice President, Human Resources                                   
David Mooring...........  38 Vice President and General Manager, Personal Computer Division    
Allen Roberts...........  41 Vice President and General Manager, Memory and Technology Division
Subodh Toprani..........  42 Vice President and General Manager, Logic Products Division       
Takahiro Kamo...........  62 Chairman, Rambus K.K.                                             
William Davidow(2)(3)...  61 Chairman of the Board of Directors                                
Bruce Dunlevie(2)(3)....  40 Director                                                          
P. Michael Farmwald.....  42 Director                                                          
Charles Geschke(2)(3)...  57 Director                                                          
Mark Horowitz...........  39 Director                                                          

--------                                                                        
(1) Member of the Stock Option Committee                                        
(2) Member of the Audit Committee                                               
(3) Member of the Compensation Committee                                        

Geoff Tate has served as President, Chief Executive Officer and Director    
since joining the Company in May 1990. From February 1989 to January 1990, Mr.  
Tate served as Senior Vice President and Corporate Officer, Microprocessor and  
Peripherals with Advanced Micro Devices, Inc. ("AMD"), a semiconductor          
manufacturer. From 1979 to 1989, Mr. Tate served in various marketing and       
product line management positions with AMD. Mr. Tate holds a B.Sc. degree in    
Computer Science from the University of Alberta and an M.B.A. from the Harvard  
Graduate School of Business Administration.                                     

Gary Harmon has served as Vice President, Finance, Chief Financial Officer  
and Secretary since joining the Company in March 1993. From November 1992 to    
March 1993, Mr. Harmon was an independent consultant. From April 1992 to        
November 1992, he served as Senior Vice President--Finance and Chief Financial  
Officer for Novellus Systems Inc., a manufacturer of semiconductor equipment.   
From October 1991 to March 1992, he served as Executive Vice President--        
Finance and Chief Financial Officer of Digital Microwave Inc., a manufacturer   
of telecommunications equipment. From 1989 to 1991, Mr. Harmon served as        
Executive Vice President--Finance and Chief Financial Officer and was a co-     
founder of International Golf Partners, a golf course development company.      
From 1970 to 1989, Mr. Harmon served in various positions with electronics      
manufacturer Avantek, Inc., including Senior Vice President--Finance,           
Secretary and director. Mr. Harmon holds a B.S. degree in Electrical            
Engineering from Stanford University and an M.B.A. from the Harvard Graduate    
School of Business Administration.                                              

Ed Larsen has served as Vice President, Human Resources, since joining the  
Company in September 1996. From May 1995 to August 1996, he served as           
Director, Human Resources for Cirrus Logic, Inc., a semiconductor               
manufacturer. From June 1991 to July 1993 and May 1994 to May 1995, Mr. Larsen  
was an independent consultant. From July 1993 to April 1994, he served as       
Director, Human Resources for Zilog, Inc., a semiconductor manufacturer. Mr.    
Larsen has also held various human resources positions with VLSI Technology     
and Motorola. Mr. Larsen holds a B.S. degree in Business Administration from    
the University of Minnesota.                                                    

David Mooring joined the Company in February 1991 as Vice President,        
Marketing and Sales. He served as Vice President, Business Development from     
May 1994 to March 1997, when he became Vice President and General Manager of    
the Personal Computer Division. From 1989 to 1991, he served as Vice President  
of                                                                              

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Marketing and Sales at Vitesse Semiconductor, Inc., a semiconductor             
manufacturer. From 1980 to 1989, Mr. Mooring held various marketing and sales   
positions at Intel Corporation. Mr. Mooring holds a B.S. degree in Economics    
from the University of Santa Clara, an M.B.A. from Pepperdine University and    
an M.S. degree in Computer Engineering from the University of Southern          
California.                                                                     

Allen Roberts joined the Company in February 1991 as Vice President,        
Engineering. In March 1997, he became Vice President and General Manager of     
the Memory and Technology Division. In 1986, he co-founded FTL which merged     
that year with MIPS Computer Systems, Inc. ("MIPS"). He served as Director of   
High-End Engineering at MIPS from 1986 until 1991. Mr. Roberts has also held    
various engineering positions at Elxsi Inc., Infotek Systems and the Jet        
Propulsion Laboratory. Mr. Roberts holds a B.S. degree in Electrical            
Engineering from Stanford University.                                           

Subodh Toprani joined the Company in May 1994 as Vice President, Marketing. 
In March 1997, he became Vice President and General Manager of the Logic        
Products Division. From February 1992 to April 1994, Mr. Toprani served as      
Director of Marketing and Systems Engineering with the Personal Computer        
Products Division of AMD. From 1982 to 1992, Mr. Toprani served in various      
field engineering and marketing positions with AMD. He has also held various    
engineering positions with Bally Manufacturing Corp., a manufacturer of gaming  
and leisure equipment, and Gaming Devices Inc., a manufacturer of gaming        
equipment. Mr. Toprani holds a B.S. degree in Physics from St. Xavier's         
College of Bombay and B.S. and M.S. degrees in Electrical Engineering from the  
Illinois Institute of Technology.                                               

Takahiro "Tom" Kamo is an independent consultant and has served as Chairman 
of the Company's Japanese subsidiary, Rambus K.K., since June 1991. Mr. Kamo    
is not deemed an executive officer of the Company for purposes of Section 16    
of the Exchange Act or Rules 144 and 701 promulgated under the Securities Act.  
In 1974, Mr. Kamo established Intel Corporation's Japanese subsidiary, Intel    
Japan K.K., and served as its President and Vice Chairman. In 1988, he was      
elected Chairman of Intel Japan K.K. and served in this capacity until his      
retirement in 1990. In 1963, Mr. Kamo co-founded Tokyo Electron Laboratories    
("TEL"), a Japanese importer/exporter of electronic products. He later founded  
TEL Engineering, a subsidiary of TEL involved in the design and manufacturing   
of semiconductor production equipment, where he served as President until       
1974. Mr. Kamo holds a B.S. degree in Electrical Engineering from Waseda        
University in Tokyo.                                                            

William Davidow has served as Chairman of the Board of Directors since the  
Company was founded in March 1990. Since 1985, Dr. Davidow has been a general   
partner of Mohr, Davidow Ventures, a venture capital firm. From 1973 to 1985,   
he held a number of management positions at Intel Corporation, including        
Senior Vice President of Marketing and Sales, Vice President of the             
Microcomputer Division and Vice President of the Microcomputer Systems          
Division. Dr. Davidow holds A.B. and M.S. degrees in Electrical Engineering     
from Dartmouth College and a Ph.D. in Electrical Engineering from Stanford      
University. He also serves as a director of Vantive Corporation and several     
privately held companies.                                                       

Bruce Dunlevie has served as a director of the Company since its founding in
March 1990. He has been a member of the venture capital firm Benchmark Capital  
since April 1996, and a general partner of the venture capital firm Merrill,    
Pickard, Anderson & Eyre since 1989. Mr. Dunlevie also served as Vice           
President and General Manager of the Personal Computer Systems Division of      
Everex Systems, a personal computer manufacturer. He holds a B.A. degree in     
History from Rice University and an M.B.A. from Stanford University. Mr.        
Dunlevie also serves as a director of Geoworks, an operating systems software   
company, and several privately held companies.                                  

P. Michael Farmwald has served as a director since co-founding the Company  
in March 1990, and as Vice President and Chief Scientist from March 1990 to     
November 1993. He co-founded Chromatic Research Inc., a privately held          
developer of media processors for the PC industry, in November 1993, where he   
currently holds the title of Visionary and serves as a director. From 1988 to   
1989, Dr. Farmwald was an associate professor of Electrical and Computer        
Engineering at the University of Illinois. In 1986, he co-founded FTL which     
merged that year with MIPS. From 1986 to 1988, Dr. Farmwald was Chief           
Scientist for High End Systems at MIPS. Dr.                                     

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Farmwald holds a B.S. degree in Mathematics from Purdue University and a Ph.D.  
in Computer Science from Stanford University. He also serves as a director of   
a privately held company.                                                       

Charles Geschke has served as a director of the Company since February 1996.
He is a co-founder of Adobe Systems Incorporated, a software company, and has   
served as a director of that company since 1982, Chief Operating Officer from   
1986 to 1995 and President since 1989. Prior to 1982, Dr. Geschke held various  
positions with Xerox's Palo Alto Research Center, including Manager of the      
Imaging Sciences Laboratory. He holds an A.B. degree in Classics and an M.S.    
degree in Mathematics from Xavier University of Ohio, and received his Ph.D.    
in Computer Science from Carnegie-Mellon University. Dr. Geschke also serves    
as a director of a privately held company.                                      

Mark Horowitz has served as a director since co-founding the Company in     
March 1990 and as Vice President from March 1990 to May 1994 and currently      
continues to serve in a part-time capacity as a member of the technical staff.  
Dr. Horowitz has taught at Stanford University since 1984 where he is           
currently professor of Electrical Engineering. He holds B.S. and M.S. degrees   
in Electrical Engineering from Massachusetts Institute of Technology and        
received his Ph.D. in Electrical Engineering from Stanford University.          

CLASSIFIED BOARD                                                                

The Company's Amended and Restated Certificate of Incorporation provides for
a Board of Directors consisting of two classes serving two-year staggered       
terms. Class I consists of Mr. Dunlevie, Dr. Geschke and Dr. Horowitz. Class    
II consists of Dr. Davidow, Dr. Farmwald and Mr. Tate. The initial term of      
office of the Class I directors expires at the annual meeting of stockholders   
in calendar 1998. The initial term of office of the Class II directors expires  
at the annual meeting of stockholders held in calendar 1999.                    

BOARD COMMITTEES                                                                

The Company's Board of Directors the ("Board") has an Audit Committee, a    
Compensation Committee and a Stock Option Committee. The Audit Committee,       
currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke, reviews the   
internal accounting procedures of the Company and consults with and reviews     
the services provided by the Company's independent auditors. The Compensation   
Committee, currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke,    
reviews and recommends to the Board the compensation and benefits of all        
officers, directors and consultants of the Company and reviews general policy   
relating to compensation and benefits of the Company. The Compensation          
Committee also administers the issuance of stock options and other awards       
under the Company's 1997 Stock Plan and 1997 Employee Stock Purchase Plan.      
The Stock Option Committee, currently comprised of Mr. Tate, administers the    
grant of stock options under the Company's 1997 Stock Plan to all employees     
other than executive officers, provided that options granted by the Stock       
Option Committee shall not exceed 25,000 shares per year to any employee.       

DIRECTOR COMPENSATION                                                           

Board members do not receive any cash fees for their service on the Board or
any Board committee, but they are entitled to reimbursement of all reasonable   
out-of-pocket expenses incurred in connection with their attendance at Board    
and Board committee meetings. All Board members are eligible to receive stock   
options pursuant to the discretionary option grant program in effect under the  
Company's 1997 Stock Plan, and outside directors receive stock options          
pursuant to the automatic option grant program in effect under the 1997 Stock   
Plan. During fiscal 1996, in connection with joining the Company's Board of     
Directors, Dr. Geschke was granted an option for the purchase of 50,000 shares  
of Common Stock at an exercise price of $4.00 per share. In February 1997, Dr.  
Davidow, Mr. Dunlevie and Dr. Geschke were granted options for the purchase of  
10,000 shares, 35,000 shares and 10,000 shares of Common Stock, respectively,   
at an exercise price of $8.00 per share. See "Management--Stock Plans."         

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

The Company's Compensation Committee reviews and recommends to the Board the
compensation and benefits of all officers, directors and consultants of the     
Company and reviews general policy relating to compensation and benefits of     
the Company. The Compensation Committee also administers the issuance of stock  
options and other awards under the Company's 1997 Stock Plan and 1997 Employee  
Stock Purchase Plan. The Committee is currently comprised of Dr. Davidow, Mr.   
Dunlevie and Dr. Geschke. No interlocking relationship exists between any       
member of the Company's Compensation Committee and any member of any other      
company's board of directors or compensation committee.                         

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS                             

The Company's Amended and Restated Certificate of Incorporation limits the  
liability of directors to the maximum extent permitted by Delaware law.         
Delaware law provides that a corporation's certificate of incorporation may     
contain, and the Company's Amended and Restated Certificate of Incorporation    
does contain, a provision eliminating or limiting the personal liability of a   
director for monetary damages for breach of their fiduciary duties as           
directors, except for liability (i) for any breach of their duty of loyalty to  
the corporation or its stockholders, (ii) for acts or omissions not in good     
faith for which involve intentional misconduct or a knowing violation of law,   
(iii) for unlawful payments of dividends or unlawful stock repurchases or       
redemptions as provided in Section 174 of the Delaware General Corporation Law  
or (iv) for any transaction from which the director derived an improper         
personal benefit.                                                               

The Company's Amended and Restated Bylaws provide that the Company shall    
indemnify its directors, officers, employees and agents to the fullest extent   
permitted by law. The Company believes that the indemnification under its       
Amended and Restated Bylaws covers at least negligence and gross negligence on  
the part of indemnified parties.                                                

The Company has entered into agreements to indemnify its directors and      
officers, in addition to the indemnification provided for in the Company's      
Amended and Restated Bylaws. These agreements, among other things, indemnify    
the Company's directors and officers for certain expenses (including attorney   
fees), judgments, fines and settlement amounts incurred by any such person in   
any action or proceeding, including any action by or in the right of the        
Company, arising out of such person's services as a director or officer of the  
company, any subsidiary of the Company or any other company or enterprise to    
which the person provides services at the request of the Company. The Company   
believes that these provisions and agreements are necessary to attract and      
retain qualified directors and officers.                                        

At present, there is no pending litigation or proceeding involving any      
director, officer, employee or agent of the Company where indemnifications      
will be required or permitted. The Company is not aware of any threatened       
litigation or proceeding that might result in a claim for such                  
indemnification.                                                                

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EXECUTIVE COMPENSATION                                                          

The following table sets forth certain summary information regarding the    
compensation of the Company's Chief Executive Officer and each of the other     
four most highly compensated executive officers (collectively, the "Named       
Executive Officers") whose annual compensation (salary and bonus) for services  
rendered in all capacities to the Company exceeded $100,000 for the fiscal      
year ended September 30, 1996:                                                  

SUMMARY COMPENSATION TABLE  

                                                                [Download Table]

                                                       LONG-TERM                  
                                                      COMPENSATION                
                                                         AWARDS                   
                                                      ------------                
                                ANNUAL COMPENSATION    SECURITIES                 
                                ---------------------  UNDERLYING     ALL OTHER   
NAME AND PRINCIPAL POSITION(1)   SALARY    BONUS(2)    OPTIONS(#)  COMPENSATION(3)
------------------------------  ---------- ---------- ------------ ---------------
                                                                                  
Geoff Tate..................    $  215,000 $  32,789        --         $2,656     
 President and Chief                                                              
 Executive Officer                                                                
Gary Harmon.................       154,425    28,189      6,500         1,684     
 Vice President, Finance and                                                      
 Chief Financial Officer                                                          
David Mooring...............       149,705    53,424     11,500         2,047     
 Vice President, Business                                                         
 Development                                                                      
Allen Roberts...............       178,266    26,235     15,500         2,409     
 Vice President, Engineering                                                      
Subodh Toprani..............       165,000    24,721     10,500         2,331     
 Vice President, Marketing                                                        

--------                                                                        
(1) For current positions of the individuals named, see "Management--Executive  
Officers, Directors and Key Personnel."                                 
(2) Earned for services during year.                                            
(3) Consists of group term life insurance premiums paid by the Company.         

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OPTION GRANTS IN FISCAL 1996  

The following table sets forth certain information regarding stock options  
granted to each of the Named Executive Officers for the fiscal year ended       
September 30, 1996.                                                             

                                                        [Enlarge/Download Table]

                                                                            POTENTIAL REALIZABLE
                                       INDIVIDUAL GRANTS(1)                   VALUE AT ASSUMED  
                         -------------------------------------------------     ANNUAL RATES OF  
                         NUMBER OF       % OF                                   STOCK PRICE     
                         SECURITIES TOTAL OPTIONS                              APPRECIATION     
                         UNDERLYING   GRANTED TO     EXERCISE               FOR OPTION TERM(2)  
                          OPTIONS    EMPLOYEES IN     PRICE     EXPIRATION ---------------------
  NAME                    GRANTED   FISCAL YEAR(3) PER SHARE(4)    DATE        5%        10%    
  ----                   ---------- -------------- ------------ ---------- ---------- ----------
                                                                                                
Geoff Tate..............      --          --            --           --           --         -- 
Gary Harmon.............    6,500        2.39%        $3.00      12/4/05   $   12,263 $   31,078
David Mooring...........   11,500        4.22          3.00      12/4/05       21,697     54,984
Allen Roberts...........   15,500        5.69          3.00      12/4/05       29,244     74,109
Subodh Toprani..........   10,500        3.85          3.00      12/4/05       19,810     50,203

--------                                                                        
(1) Each of the options listed in the table was granted on December 4, 1995     
and is immediately exercisable. The shares purchasable thereunder are   
subject to repurchase by the Company at the original exercise price paid
per share upon the optionee's cessation of service prior to vesting in  
such shares. The repurchase right lapses and the optionee vests in the  
shares subject to, or issued upon exercise of, the options in monthly   
installments over the year beginning October 1, 1999.                   
(2) Potential realizable value is based on the assumption that the Common       
Stock of the Company appreciates at the annual rate shown (compounded   
annually) from the date of grant until the expiration of the ten year   
term. These numbers are calculated based on Securities and Exchange     
Commission requirements and do not reflect the Company's estimate of    
future stock price growth.                                              
(3) The Company granted options to purchase 272,500 shares of Common Stock to   
employees during fiscal 1996.                                           
(4) Options were granted at an exercise price equal to the fair market value    
of the Company's Common Stock, as determined by the Board of Directors. 

On November 13, 1996, the Company granted the following options at exercise 
prices of $5.00 per share to the following Named Executive Officers: David      
Mooring, 20,000 shares; Allen Roberts, 20,000 shares; Gary Harmon, 10,000       
shares; Subodh Toprani, 10,000 shares; Geoff Tate, 75,000 shares.               

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AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES 

The following table sets forth for each of the Named Executive Officers the 
shares acquired and the value realized on each exercise of stock options        
during the year ended September 30, 1996 and the year-end number and value of   
exercisable and unexercisable options:                                          

                                                        [Enlarge/Download Table]

                                                NUMBER OF SECURITIES      VALUE OF UNEXERCISED   
                                               UNDERLYING UNEXERCISED     IN-THE-MONEY OPTIONS   
                           SHARES               OPTIONS AT 9/30/96(1)         AT 9/30/96(2)      
                          ACQUIRED    VALUE   ------------------------- -------------------------
          NAME           ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
          ----           ----------- -------- ----------- ------------- ----------- -------------
                                                                                                 
Geoff Tate..............      --          --    497,955      213,334    $2,402,657    $981,336   
Gary Harmon.............      --          --     45,000       45,500       213,750     187,750   
David Mooring...........      --          --     75,208      101,292       351,257     404,043   
Allen Roberts...........   50,000    $193,500   269,738      135,762     1,293,576     546,424   
Subodh Toprani..........      --          --        --        70,500           --      288,000   

--------                                                                        
(1) Although each option is immediately exercisable for all the option shares,  
any shares purchased under the option are subject to repurchase by the  
Company, at the exercise price paid per share, in the event the optionee
ceases to provide services to the Company prior to vesting in those     
  shares. Accordingly, the table reflects such option shares as to which the
  repurchase right has lapsed under the "exercisable" column and such option
shares subject to the repurchase right under the "unexercisable" column.
(2) Based on the fair market value of the Company's Common Stock at September   
30, 1996 ($5.00 per share as determined by the Board of Directors) less 
the exercise price payable for such shares.                             

STOCK PLANS                                                                     

1990 Stock Plan                                                               

The Company's 1990 Stock Plan (the "1990 Stock Plan") provides for the grant
to employees of incentive stock options and the grant of nonstatutory stock     
options to employees and consultants of the Company. Stock Purchase Rights      
("SPRs") may also be granted under the 1990 Stock Plan. As of March 31, 1997,   
an aggregate of 6,875,000 shares of Common Stock has been reserved for          
issuance under the 1990 Stock Plan, 4,352,178 shares had been issued upon the   
exercise of stock options under the 1990 Plan, and options to purchase an       
aggregate of 2,174,470 shares of Common Stock were outstanding under the 1990   
Stock Plan. Subsequent to March 31, 1997, the Board of Directors granted        
options to purchase 246,500 shares of Common Stock under the 1990 Stock Plan.   
No SPRs have been granted under the 1990 Stock Plan. The Board of Directors     
has determined that no further options or SPRs will be granted under the 1990   
Stock Plan after this offering. Any shares underlying options granted under     
the 1990 Stock Plan that expire or are cancelled, or any unvested shares that   
are repurchased by the Company under the 1990 Stock Plan, will not be           
reissued.                                                                       

The 1990 Stock Plan may be administered by the Board of Directors or a      
committee designated by the Board (the "1990 Stock Plan Administrator").        
Options and SPRs granted under the 1990 Stock Plan are not generally            
transferable by the optionee except by will or by the laws of descent and       
distribution and are exercisable during the life of the optionee only by the    
optionee. Options granted under the 1990 Stock Plan must be exercised within    
90 days of the end of the optionee's status as an employee or consultant to     
the Company, or within twelve months after such optionee's death or             
disability, but in no event later than the expiration of the option term. The   
exercise price of all options and SPRs granted under the 1990 Stock Plan was    
determined by the 1990 Stock Plan Administrator. With respect to any            
participant who owns stock possessing more than ten percent of the voting       
power of all classes of the Company's outstanding capital stock (a "10%         
Stockholder"), the exercise price of any option granted must equal at least     
110% of the fair market value on the grant date. The exercise price of          
incentive stock options for all other employees shall be no less than 100% of   
the fair market value per share on the date of the grant. The exercise price    
of nonstatutory stock options must equal at least 85% of the fair market value  
on the grant date. The maximum term of an option granted under the 1990 Stock   
Plan may not exceed ten years from the date of grant (five years in the case    
of an incentive stock option granted to a                                       

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10% Stockholder). The 1990 Stock Plan Administrator determines the vesting      
schedule of all options granted under the 1990 Stock Plan. The 1990 Stock Plan  
requires the Board to determine the times and conditions at which options can   
be exercised, and the option agreements under the 1990 Stock Plan generally     
allow for early exercise of all options granted under such plan if the          
optionee executes a Restricted Stock Purchase Agreement upon such early         
exercise.                                                                       

1997 Stock Plan                                                               

The Company's 1997 Stock Plan (the "1997 Stock Plan") was adopted by the    
Board of Directors in February 1997 and approved by the stockholders in March   
1997. The 1997 Stock Plan provides for the grant of incentive stock options to  
employees (including officers and employee directors) and for the grant of      
nonstatutory stock options and SPRs to employees, directors and consultants. A  
total of 1,000,000 shares of Common Stock has been reserved for issuance under  
the 1997 Stock Plan, plus an annual increase as of the first day of each        
fiscal year during the term of the 1997 Stock Plan equal to the lesser of (i)   
the number of shares needed to restore the maximum aggregate number of shares   
which may be optioned and sold under the 1997 Stock Plan to 1,000,000 shares,   
(ii) four percent (4%) of the outstanding shares on such date or (iii) a        
lesser amount determined by the Board. Prior to this offering, there were no    
options or SPRs outstanding under the 1997 Stock Plan.                          

The 1997 Stock Plan may be administered by the Board of Directors or a      
committee designated by the Board (the "Administrator"). Options and SPRs       
granted under the 1997 Stock Plan are not generally transferable by the         
optionee except by will or by the laws of descent and distribution, and are     
exercisable during the lifetime of the optionee only by such optionee. Options  
granted under the 1997 Stock Plan must be exercised within three months of the  
end of the optionee's status as an employee, director or consultant of the      
Company, or within twelve months after such optionee's death or disability,     
but in no event later than the expiration of the option term. The exercise      
price of all incentive and nonstatutory stock options granted under the 1997    
Stock Plan shall be determined by the Administrator. With respect to any        
participant who owns stock possessing more than ten percent of the voting       
power of all classes of the Company's outstanding capital stock (a "10%         
Stockholder"), the exercise price of any incentive stock option granted must    
equal at least 110% of the fair market value on the grant date. The exercise    
price of incentive stock options and nonstatutory stock options for all other   
employees shall be no less than 100% of the fair market value per share on the  
date of the grant. The maximum term of an option granted under the 1997 Stock   
Plan may not exceed ten years from the date of grant (five years in the case    
of an incentive stock option granted to a 10% Stockholder). In the case of      
SPRs, unless the Administrator determines otherwise, the Company shall have a   
repurchase option exercisable upon the voluntary or involuntary termination of  
the purchaser's employment with the Company for any reason (including death or  
disability). Such repurchase option lapses at a rate determined by the          
Administrator. The purchase price for shares repurchased by the Company shall   
be the original price paid by the purchaser and may be paid by cancellation of  
any indebtedness of the purchaser to the Company. In the event of a merger or   
sale of substantially all of the assets of the Company, the acquiring or        
successor corporation must either assume the outstanding options and SPRs       
under the 1997 Stock Plan or substitute equivalent options or SPRs to purchase  
shares of the acquiring or successor corporation (or a parent or subsidiary of  
the acquiring or successor corporation). If an employee is involuntarily        
terminated by the acquiring or successor corporation within twelve months of    
the merger or asset sale (other than for cause), or if such acquiring or        
successor corporation refuses to substitute or assume outstanding options or    
SPRs, the employee's options and SPRs fully vest and become immediately         
exercisable.                                                                    

The 1997 Stock Plan also provides for an automatic grant of an option to    
purchase 10,000 shares of Common Stock (the "First Option") to each non-        
employee director who becomes a non-employee director after the effective date  
of the 1997 Stock Plan provided that an employee director who becomes a non-    
employee director is not eligible for the First Option. In addition, each non-  
employee director shall automatically be granted an option to purchase 5,000    
shares (a "Subsequent Option") on October 1 of each year provided he or she is  
then a non-employee director and, provided further, that on such date he or     
she has served on the Board for at least six months. First Options and each     
Subsequent Option shall have a term of ten years. One-eighth of the shares      
subject to the First Option and each of the Subsequent Options shall vest on    
the date six months after the grant of the option, and an additional 1/48 of    
the shares subject to the option shall become exercisable each                  

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month thereafter, provided that the optionee continues to serve as a non-       
employee director through and on such dates. The exercise price of the First    
Option and each Subsequent Option shall be 100% of the fair market value per    
share of the Company's Common Stock on the date of the grant of the option.     

1997 Employee Stock Purchase Plan                                             

The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan") 
was adopted by the Board of Directors in February 1997 and approved by the      
stockholders in March 1997. The Company has reserved a total of 400,000 shares  
of Common Stock for issuance under the Stock Purchase Plan, plus an annual      
increase as of the last day of each fiscal year during the term of the Stock    
Purchase Plan equal to the lesser of (i) the number of shares needed to         
restore the maximum aggregate number of shares which may be optioned and sold   
under the Stock Purchase Plan to 400,000 shares, (ii) one percent (1%) of the   
outstanding shares on such date or (iii) a lesser amount determined by the      
Board. The Stock Purchase Plan, which is intended to qualify under Section 423  
of the Internal Revenue Code of 1986, as amended (the "Code"), permits          
eligible employees of the Company to purchase shares of Common Stock through    
payroll deductions of up to fifteen percent of their compensation, up to a      
maximum of $25,000 worth of Common Stock (valued at the date of grant) in each  
calendar year. The Stock Purchase Plan will be implemented by consecutive       
overlapping 24-month offering periods (each an "Offering Period"). The initial  
Offering Period will begin on the effective date of this offering and will end  
on the last trading day in the period ending April 30, 1999. All employees who  
work at least twenty hours per week and more than five months per calendar      
year are eligible to participate in the Stock Purchase Plan.                    

The price of Common Stock purchased under the Stock Purchase Plan will be   
85% of the lower of the fair market value of the Common Stock on the first day  
of each Offering Period or the date of purchase. Employees may withdraw from    
the Stock Purchase Plan at any time during an Offering Period, and the balance  
of the payroll deductions will be returned to the employee. Participation in    
the Stock Purchase Plan ends automatically upon termination of employment with  
the Company. Rights granted under the Stock Purchase Plan are not transferable  
by a participant other than by will, the laws of descent and distribution or    
as otherwise provided under the Stock Purchase Plan.                            

The Stock Purchase Plan will be administered by the Board of Directors or by
a committee appointed by the Board. The Board may amend or modify the Stock     
Purchase Plan at any time. The Stock Purchase Plan will terminate ten years     
after the effective date of its adoption, unless sooner terminated by the       
Board.                                                                          

401(k) Plan                                                                   

As of January 1, 1991, the Company adopted a tax-qualified employee savings 
and retirement plan (the "401(k) Plan") covering the Company's employees.       
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their       
current compensation by up to the lesser of 20% of their annual compensation    
or the statutorily prescribed annual limit ($9,500 in calendar years 1996 and   
1997) and have the amount of such reduction contributed to the 401(k) Plan.     
Although the Company does not currently match contributions by employees, the   
401(k) Plan allows for matching contributions to be made by the Company in an   
amount determined by the Company. The trustees under the 401(k) Plan, at the    
direction of each participant, invest the assets of the 401(k) Plan in          
designated investment options. The 401(k) Plan is intended to qualify under     
Section 401 of the Code, so that contributions to the 401(k) Plan, and income   
earned on the 401(k) Plan contributions, are not taxable until withdrawn, and   
so that the contributions by the Company will be deductible when made.          

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CERTAIN TRANSACTIONS  

TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% SECURITY HOLDERS         

Founders' Stock Repurchases. Founders of the Company received an aggregate  
of 2,182,653 shares of Common Stock upon incorporation of the Company. These    
shares were subject to the Company's assignable right of repurchase under a     
Stock Restriction Agreement. During fiscal 1994, the Company amended the Stock  
Restriction Agreement. In accordance with the amendment, the Company            
repurchased 165,000 shares of its Common Stock at a price of $0.04 per share,   
and the Company's right of repurchase with respect to the remaining shares      
expired. During fiscal 1995, the Company repurchased an additional 88,000       
shares of Common Stock from founders at a price of $0.04 per share.             

Rambus Partners. Under an agreement signed in March 1990, the Company       
secured certain patent rights and technology from its founders. The Company     
committed, under this agreement, to pay to the founders up to a total of 24%    
of amounts received from any licensing of the patent rights and technology to   
third parties. Subsequently, the founders assigned their rights to receive      
payments to Rambus Partners, an entity wholly owned by the founders. In         
September 1992, the Company acquired Rambus Partners in exchange for 978,260    
shares of the Company's Common Stock. In addition the Company assumed option    
obligations for a total of 146,739 shares of the Company's Common Stock. In     
September 1992, the Company also entered into agreements to pay certain cash    
amounts to the founders. The total amounts paid to the founders under these     
agreements were approximately $244,000 in each of the fiscal years 1994, 1995   
and 1996 and in the first half of fiscal 1997. See Note 9 of Notes to           
Consolidated Financial Statements.                                              

Series C Financing. On December 23, 1993, in connection with the Company's  
Series C Preferred Stock financing, the Company sold in the aggregate           
1,249,998 shares of Series C Preferred Stock at a price per share of $3.00 to   
the following investors which are, or which are affiliated with, directors of   
the Company or entities that own more than 5% of the Company's securities,      
each of which purchased the aggregate number of shares indicated:               

                                                                [Download Table]

                                                                 % OF           
SHAREHOLDER:                                            SHARES  SERIES AGGREGATE
------------                                            ------- ------ ---------
                                                                                
Merrill, Pickard, Anderson & Eyre V, L.P.                                       
 (Bruce Dunlevie)...................................... 322,628 25.8%  $967,884 
Mohr, Davidow Ventures II                                                       
 (William Davidow)..................................... 322,628 25.8%   967,884 
Kleiner, Perkins, Caufield & Byers V................... 322,628 25.8%   967,884 
Integral Capital Management, L.P. ..................... 141,057 11.3%   423,171 
Dominion Income Management Corp........................ 141,057 11.3%   423,171 

Series D Financing. On February 24, 1995, in connection with the Company's  
Series D Preferred Stock financing, the Company sold 1,411,765 shares of        
Series D Preferred Stock to certain affiliates of the Goldman, Sachs Group,     
L.P. at a price per share of $4.25 or an aggregate of $6.0 million. Goldman     
Sachs currently owns more than 5% of the Company's securities.                  

Simultaneously with the consummation of this offering, all shares of        
Preferred Stock will be converted into shares of Common Stock. Holders of       
Preferred Stock are entitled to certain registration rights with respect to     
the Common Stock issued or issuable upon conversion thereof. See "Description   
of Capital Stock--Registration Rights." The Company believes that the shares    
issued in these transactions were sold at the then fair market value and that   
the terms of these transactions were no less favorable than the Company could   
have obtained from unaffiliated third parties.                                  

Loans to Officers. In February 1997, in connection with the exercise of     
options to purchase shares of the Company's Common Stock by Geoff Tate, David   
Mooring and Ed Larsen, the Company provided full recourse                       

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loans to such executive officers in the aggregate principal amounts of          
$160,000, $198,250 and $200,000, respectively. The loans bear interest at an    
annual rate of 12.0%, are evidenced by promissory notes and are secured by a    
pledge of an aggregate of 400,000, 114,000 and 40,000 shares, respectively.     
Principal and all accrued interest on the loans are due in September 1998.      

Chromatic Research Inc. In February 1994, the Company licensed its interface
technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor     
design company. Under the terms of the license, Rambus received 626,053 shares  
of Chromatic Series B Preferred Stock (representing 5% of the then outstanding  
shares of Chromatic) and continuing royalties. Chromatic was formed in May      
1993 (then called Xenon Microsystems Corporation) by, among others, Dr.         
Farmwald who continues to serve as a director of, and consultant to, Chromatic  
through the date hereof. Investors in Chromatic include affiliates of Mohr,     
Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins,       
Caufield & Byers. In connection with these investments in Chromatic, Dr.        
Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors   
of Chromatic. See Note 13 of Notes to Consolidated Financial Statements.        

Purchase of Rambus Series A Preferred Stock from Intel Corporation. In 1990,
the Company entered into an agreement with Intel Corporation, under which it    
issued 562,004 shares of Series A Preferred Stock to Intel. The shares issued   
were subject to Rambus' assignable right to repurchase the shares, under        
certain circumstances, at the original price paid by Intel. In fiscal 1995,     
this right of repurchase was sold by the Company to entities affiliated with    
Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard,   
Andersen & Eyre, Integral Capital Partners and Dominion Income Management       
Corp. for an aggregate of $936,012. These entities then exercised the right     
and purchased the Rambus Series A Preferred Stock from Intel.                   

The Company believes that all related-party transactions described above    
were on terms no less favorable than could have been otherwise obtained from    
unrelated third parties. All future transactions between the Company and its    
executive officers, directors and principal stockholders will be approved by a  
majority of the independent and disinterested members of the Board of           
Directors and will be on terms no less favorable than could be obtained from    
unrelated third parties. In addition, the Board of Directors has voted that     
any loans or guarantees in the future by the Company for its executive          
officers, directors or principal stockholders will be approved by a majority    
of the independent and disinterested members of the Board on the basis that     
such loans or guarantees will be made only for bona fide business purposes.     

1996 TRANSACTIONS WITH INTEL CORPORATION                                        

In November 1996, the Company entered into a new license agreement with     
Intel Corporation ("Intel") under which Rambus granted to Intel a worldwide,    
nonexclusive license to manufacture and sell Rambus ICs (the "Intel             
Contract"). Under the Intel Contract, Intel has agreed to use its reasonable    
best efforts to design, develop, mass produce, market and sell a commercially   
attractive PC main memory control chipset which implements certain Rambus       
interface specifications. Under the Intel Contract, Intel granted to Rambus a   
worldwide, royalty-free, sublicensable right to certain Intel intellectual      
property for use in the implementation of the Rambus interface technology.      

Under certain circumstances, the Intel Contract imposes an effective limit  
of 2% on the royalty rate which the Company will receive from sales of RDRAMs   
by its licensees. Because this effective limit is not triggered with respect    
to a given licensee unless the licensee is shipping relatively high volumes of  
RDRAMs, the Company believes that such provision will not have a material       
adverse effect on its business or financial condition.                          

The Intel Contract grants to Intel certain rights to make a competing offer 
if Rambus commences negotiations with any third party to enter into a           
transaction (i) after which such third party would beneficially own more than   
50% of the voting power of Rambus, (ii) in which Rambus would be a party to a   
merger with such third party and Rambus would not be the surviving corporation  
or (iii) Rambus would transfer all or substantially all of its business and     
assets to the third party. The Intel Contract does not require that Rambus      

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accept any such competing offer from Intel. However, should Rambus complete     
such a transaction with a third party after receiving from Intel a bona fide    
offer including money and other consideration at least equal to the money and   
other consideration included in the third party offer, and on other terms and   
conditions at least as favorable as those included in the third party offer,    
then certain of Intel's royalty obligations would cease, the Company would be   
obligated to refund to Intel certain previously paid royalties, and the         
license of Rambus technology to Intel under the Intel Contract would become     
fully paid, irrevocable and would survive any termination of the Intel          
Contract. This provision of the Intel Contract may significantly discourage     
future acquisition attempts, even where such acquisitions might be in the best  
interest of Rambus stockholders. This provision of the Intel Contract will      
terminate if Intel fails to maintain a specified level of shipments of Rambus   
compatible ICs after a specified date.                                          

The Intel Contract terminates upon the last to expire of the Rambus patents 
licensed to Intel. The Intel Contract is subject to early termination (i) by    
Intel at any time upon written notice to Rambus or (ii) by Rambus upon certain  
breaches, defaults, or failures by Intel to achieve certain milestones or       
provide certain support for Rambus technology.                                  

In connection with the Intel Contract, Rambus granted to Intel a warrant for
the purchase of up to 1,000,000 shares of Rambus Common Stock at an exercise    
price of $10.00 per share. Such warrant vests and becomes exercisable by Intel  
only if more than 20% of the main memory chipsets shipped by Intel in each of   
two consecutive calendar quarters implement certain Rambus interface            
specifications, which will result in a charge to the statement of operations    
at the time of achievement of the milestones based on the fair value of the     
warrant. The warrant expires on January 7, 2005; provided, however, that if     
the vesting condition described above has not been satisfied by December 31,    
2000, then the warrant will expire on December 31, 2000. Rambus granted to      
Intel certain registration rights with respect to the shares of Common Stock    
purchasable upon exercise of the warrant.                                       

Intel may designate a representative to observe meetings of the Rambus Board
of Directors at such time as 20% of the main memory chipsets shipped by Intel   
during two consecutive quarters implement certain Rambus interface              
specifications. Following exercise of the warrant, for so long as Intel         
continues to hold at least 500,000 shares of the Company's Common Stock, Intel  
may nominate a representative to the Rambus Board of Directors and the Company  
must include such nominee among management's nominees to the stockholders and   
must solicit stockholder votes in favor of such nominee to the same extent      
that it solicits stockholder votes in favor of management's other nominees.     
Intel's right to maintain a Board observer or Board member will exist during a  
calendar quarter only if more than 20% of the main memory chipsets shipped by   
Intel during each of the two immediately preceding calendar quarters            
implemented certain Rambus interface specifications. The Rambus Board of        
Directors may exclude the Intel representative from a Board meeting for         
certain reasons, including discussion of transactions or potential              
transactions between the Company and Intel or an affiliate or competitor of     
Intel, or if in the Board's reasonable good faith judgment, such attendance     
would be harmful to the Company.                                                

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PRINCIPAL STOCKHOLDERS  

The following table sets forth certain information with respect to the      
beneficial ownership of Common Stock of the Company as of March 31, 1997 and    
as adjusted to reflect the sale of the shares offered by this Prospectus        
(assuming no exercise of the Underwriter's over-allotment option), by (i) all   
persons known to the Company to be the beneficial owners of more than 5% of     
the Company's Common Stock, (ii) Named Executive Officers, (iii) each of the    
Company's directors and (iv) all directors and executive officers as a group.   

The following table has been prepared in accordance with Rule 13d-3 of the  
Securities Exchange Act of 1934 and discloses all securities beneficially       
owned by the named persons as of March 31, 1997, plus all securities which      
such persons have a right to acquire through the exercise of options or other   
rights within 60 days of March 31, 1997. Certain individuals in the table       
below have the right to acquire additional shares after such a 60-day period,   
as indicated in the footnotes to the table.                                     

                                                                [Download Table]

                                                         PERCENTAGE OF         
                                                      SHARES BENEFICIALLY      
                                          NUMBER OF        OWNED(1)            
                                            SHARES    ----------------------   
                                         BENEFICIALLY  BEFORE        AFTER     
   NAME OR GROUP OF BENEFICIAL OWNERS      OWNED(1)   OFFERING     OFFERING    
   ----------------------------------    ------------ --------     ---------   
                                                                               
Merrill, Pickard, Anderson & Eyre V,                                           
 L.P. (2)...............................   2,491,516         13.3%        11.6%
 2480 Sand Hill Road, Suite 200                                                
 Menlo Park, CA 94025                                                          
Mohr, Davidow Ventures II (3)...........   2,491,516         13.3         11.6 
 3000 Sand Hill Road, Building 1 Suite                                         
  240                                                                          
 Menlo Park, CA 94025                                                          
Kleiner Perkins Caufield & Byers V(4)...   2,391,516         12.8         11.1 
 2750 Sand Hill Road                                                           
 Menlo Park, CA 94025                                                          
The Goldman Sachs Group, L.P.(5)........   1,411,765          7.5          6.6 
 85 Broad Street, 19th Floor                                                   
 New York, NY 10004                                                            
Dominion Income Management Corp. .......   1,045,598          5.6          4.9 
 15302 25th Drive, S.E.                                                        
 Mill Creek, WA 98102                                                          
Integral Capital Management, L.P.(6)....   1,045,599          5.6          4.9 
 2750 Sand Hill Road                                                           
 Menlo Park, CA 94025                                                          
Geoff Tate(7)...........................   1,207,789          6.4          5.6 
Gary Harmon(8)..........................     160,250          0.9          0.7 
David Mooring(9)........................     306,500          1.6          1.4 
Allen Roberts(10).......................     460,500          2.4          2.1 
Subodh Toprani(11)......................     195,500          1.0          0.9 
William Davidow(12).....................   2,501,516         13.4         11.7 
Bruce Dunlevie(13)......................   2,534,516         13.5         11.8 
P. Michael Farmwald.....................   1,586,548          8.5          7.4 
Charles Geschke(14).....................      60,000          0.3          0.3 
Mark Horowitz...........................     968,365          5.2          4.5 
All directors and executive officers as                                        
 a group (11 persons)(15)...............  10,031,484         52.3         45.8 

--------                                                                        
(1) Number of shares beneficially owned and percentage of shares beneficially 
owned are based on: (i) 18,703,651 shares outstanding as of March 31, 
   1997; and (ii) after this offering, 21,453,651 shares outstanding. Unless
otherwise indicated below, the persons and entities named in the table
have sole voting and investment power with respect to all shares      
beneficially owned, subject to community property laws                

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   where applicable. All shares subject to options are currently exercisable
and are deemed to be outstanding and to be beneficially owned by the  
 person holding such options for the purpose of computing the percentage
  ownership of such person, but are not deemed to be outstanding and to be
  beneficially owned for the purpose of computing the percentage ownership
of any other person.                                                  

(2) Bruce W. Dunlevie, a director of the Company, is a general manager of     
MPAE V Management Co. which is a general partner of Merrill, Pickard, 
   Anderson & Eyre V, L.P. and is deemed to have voting and investment power
with respect to such shares. See footnote 13 below.                   

(3) William Davidow, a director of the Company, is a general partner of       
  WHD/LGM Partners which is a general partner of Mohr, Davidow Ventures II
and is deemed to have voting and investment power with respect to such
shares. See footnote 12 below.                                        

(4) Represents 2,314,016 shares and 77,500 shares held of record by Kleiner,  
Perkins, Caufield & Byers V and Kleiner, Perkins, Caufield & Byers    
Zaibatsu Fund I, respectively. KPCB V Associates, a California limited
 partnership, is deemed to have voting and investment power with respect
 to the shares held by Kleiner, Perkins, Caufield & Byers V. The general
 partners of KPCB V Associates are Frank J. Caufield, Brook H. Byers, L.
John Doerr, E. Floyd Kvamme, James P. Lally and Vinod Khosla. KPCB IV 
Associates, a California limited partnership, is deemed to have voting
   and investment power with respect to the shares held by Kleiner, Perkins,
Caufield & Byers Zaibatsu Fund I. The general partners of KPCB IV     
Associates are Tom Perkins, Frank J. Caufield, Brook H. Byers, L. John
Doerr, E. Floyd Kvamme, Regis McKenna and Vinod Khosla. No person     
  affiliated with the Company is affiliated with KPCB V Associates or KPCB
IV Associates.                                                        

(5) Represents stock owned by certain investment partnerships, of which       
  affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the general
partner, managing general partner or investment manager. Includes     
1,176,471 shares held of record by GS Capital Partners, L.P.; 57,471  
   shares held of record by Stone Street Fund 1994, L.P.; 60,175 shares held
  of record by Bridge Street Fund 1994, L.P.; 55,356 shares held of record
by Stone Street Fund 1995, L.P.; and 62,292 shares held of record by  
   Bridge Street Fund 1995, L.P. The general partner of GS Capital Partners,
L.P. is GS Advisors, L.P., a Delaware limited partnership. The general
partner of GS Advisors, L.P. is GS Advisors, Inc., a Delaware         
  corporation. The general partner of Stone Street Fund 1994, L.P. and the
   managing general partner of Bridge Street Fund 1994, L.P. is Stone Street
Funding Corp., a Delaware corporation. The general partner of Stone   
  Street Fund 1995, L.P. and the managing general partner of Bridge Street
 Fund 1995, L.P. is Stone Street Value Corp., a Delaware corporation. GS
Group disclaims beneficial ownership of the shares owned by such      
investment partnerships to the extent attributable to partnership     
   interests therein held by persons other than GS Group and its affiliates.
 Each of such investment partnerships shares voting and investment power
  with certain of its respective affiliates. No person affiliated with the
Company is affiliated with GS Group and its affiliates.               

(6) Represents 945,251 shares and 100,348 shares held of record by Integral   
   Capital Partners, L.P. and Integral Capital Partners International, C.V.,
respectively. Integral Capital Management, L.P. is the sole general   
  partner of Integral Capital Partners, L.P. and Integral Capital Partners
International, C.V. and is deemed to have voting and investment power 
with respect to such shares. Each of John Powell and Roger McNamee,   
   neither of which is an affiliate of the Company, is deemed to have voting
and investment power with respect to such shares.                     

(7) Includes 75,000 shares subject to options exercisable within 60 days of   
March 31, 1997 of which no shares were vested as of April 9, 1997 and 
   75,000 shares were unvested and subject to a right of repurchase in favor
 of the Company which lapses over time. Also includes 15,000 shares held
   of record by Mr. Tate's wife, Colleen Thygesen Tate, as Trustee for their
  children. At April 9, 1997, 173,334 shares held by Mr. Tate were subject
  to a right of repurchase in favor of the Company which lapses over time.

(8) Includes 30,500 shares subject to options exercisable within 60 days of   
March 31, 1997 of which no shares were vested as of April 9, 1997 and 
   30,500 shares were unvested and subject to a right of repurchase in favor
   of the Company which lapses over time. Also includes 2,500 shares held of
record by Heather H.                                                  

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Harmon of which Mr. Harmon disclaims beneficial ownership. At April 9,  
1997, 44,167 shares held by Mr. Harmon were subject to a right of       
repurchase in favor of the Company which lapses over time.              

(9) At April 9, 1997, 112,750 shares held by Mr. Mooring were subject to a    
right of repurchase in favor of the Company which lapses over time.   

(10) Includes 200,500 shares subject to options exercisable within 60 days of   
   March 31, 1997 of which 70,312 shares were vested as of April 9, 1997 and
130,188 shares were unvested and subject to a right of repurchase in  
favor of the Company which lapses over time.                          

(11) Includes 80,500 shares subject to options exercisable within 60 days of    
  March 31, 1997 of which 1,666 shares were vested as of April 9, 1997 and
   78,834 shares were unvested and subject to a right of repurchase in favor
of the Company which lapses over time.                                

(12) Includes all shares held by Mohr, Davidow Ventures II. See footnote 3      
 above. Mr. Davidow, as a general partner of WHD/LGM Partners, is deemed
to have voting and investment power with respect to such Shares. Also 
 includes 10,000 shares subject to options exercisable within 60 days of
March 31, 1997, of which no shares were vested as of April 9, 1997 and
   10,000 were unvested and subject to a right of repurchase in favor of the
Company which lapses over time.                                       

(13) Includes all shares held by entities affiliated with MPAE V Management     
Co. See footnote 2 above. Mr. Dunlevie, as a general partner of MPAE V
Management Co., may be deemed to beneficially own such shares, but Mr.
  Dunlevie disclaims beneficial ownership of all such shares except to the
   extent of his pecuniary interest therein. Also includes (i) 35,000 shares
subject to options exerciseable within 60 days of March 31, 1997, of  
which 25,000 shares were vested as of April 9, 1997 and 10,000 shares 
were unvested and subject to a right of repurchase in favor of the    
Company which lapses over time and (ii) 8,000 shares held of record by
Mr. Dunlevie as trustee for his children.                             

(14) Includes 25,000 shares held of record by The Geschke Family Trust Dated    
  9/25/87, and 35,000 shares subject to options exercisable within 60 days
 of March 31, 1997 of which 6,770 shares were vested as of April 9, 1997
 and 28,230 shares were unvested and subject to a right of repurchase in
favor of the Company which lapses over time.                          

(15) Includes 476,500 shares subject to options exercisable within 60 days of   
March 31, 1997 of which 103,748 shares were vested as of April 9, 1997
  and 372,752 shares were unvested and subject to a right of repurchase in
favor of the Company which lapses over time. At April 9, 1997, 364,418
shares held by such persons were subject to a right of repurchase in  
favor of the Company which lapses over time.                          

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DESCRIPTION OF CAPITAL STOCK  

The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001   
par value. The Company has designated 40,000 shares of its Preferred Stock as   
Series E Participating Preferred Stock ("Series E Preferred") for issuance      
pursuant to the exercise of rights ("Rights") under a rights agreement;         
currently, no shares of Preferred Stock are outstanding.                        

The following summary of certain provisions of the Common Stock and         
Preferred Stock does not purport to be complete and is subject to, and          
qualified in its entirety by, the provisions of the Company's Amended and       
Restated Certificate of Incorporation which is included as an exhibit to the    
Registration Statement of which this Prospectus is a part and by the            
provisions of applicable law.                                                   

COMMON STOCK                                                                    

As of March 31, 1997, there were 18,703,651 shares of Common Stock          
outstanding that were held of record by approximately 182 stockholders. There   
will be 21,453,651 shares of Common Stock outstanding (based on the number of   
shares outstanding as of March 31, 1997, and assuming no exercise of the        
Underwriters' over-allotment option) after giving effect to the sale of Common  
Stock offered to the public hereby.                                             

The holders of Common Stock are entitled to one vote for each share held of 
record on all matters submitted to a vote of stockholders. Subject to           
preferences that may be applicable to any outstanding shares of Preferred       
Stock, the holders of Common Stock are entitled to receive ratably such         
dividends, if any, as may be declared by the Board of Directors out of funds    
legally available for the payment of dividends. See "Dividend Policy." In the   
event of a liquidation, dissolution or winding up of the Company, the holders   
of Common Stock are entitled to share ratably in all assets remaining after     
payment of liabilities and liquidation preferences of any outstanding shares    
of Preferred Stock. Holders of Common Stock have no preemptive rights or        
rights to convert their Common Stock into any other securities. There are no    
redemption or sinking fund provisions applicable to the Common Stock. All       
outstanding shares of Common Stock are fully paid and non-assessable, and the   
shares of Common Stock to be issued upon completion of this offering will be    
fully paid and non-assessable.                                                  

PREFERRED STOCK                                                                 

Pursuant to the Company's Restated Certificate of Incorporation, the Board  
of Directors has the authority, without further action by the stockholders, to  
issue up to 5,000,000 shares of Preferred Stock (less 40,000 shares which have  
been designated Series E Preferred Stock pursuant to the stockholder rights     
agreement) in one or more series and to fix the designations, powers,           
preferences and privileges, and relative participating, optional or special     
rights and the qualifications, limitations or restrictions thereof, including   
dividend rights, conversion rights, voting rights, terms of redemption and      
liquidation preferences, any or all of which may be greater than the rights of  
the Common Stock. The Board of Directors, without stockholder approval, can     
issue Preferred Stock with voting, conversion or other rights that could        
adversely affect the voting power and other rights of holders of Common Stock.  
Preferred Stock could thus be issued quickly with terms calculated to delay,    
or prevent a change in control of the Company or make removal of management     
more difficult. Additionally, the issuance of Preferred Stock may have the      
effect of decreasing the market price of the Common Stock, and may adversely    
affect the voting and the other rights of the holders of Common Stock. At       
present, there are no shares of Preferred Stock outstanding and the Company     
has no plans to issue any of the Preferred Stock, expect as described below.    

Series E Preferred purchasable upon exercise of the Rights will not be      
redeemable. Each share of Series E Preferred will be entitled to an aggregate   
dividend of 1,000 times the dividend declared per share of Common Stock. In     
the event of liquidation, the holders of the Series E Preferred will be         
entitled to 1,000 times the amount paid per share of Common Stock plus an       
amount equal to accrued and unpaid dividends and distributions thereon,         
whether or not declared, to the date of such payment. Each share of Series E    
Preferred will have 1,000 votes, voting together with the Common Stock. These   
rights are protected by customary anti-dilution provisions.                     

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Because of the nature of the dividend, liquidation and voting rights of the 
shares of Series E Preferred, the value of the one one-thousandth interest in   
a share of Series E Preferred purchasable upon exercise of each Right should    
approximate the value of one share of Common Stock. See "--Certain              
Antitakeover Effects--Rights Plan."                                             

REGISTRATION RIGHTS                                                             

Pursuant to an agreement between the Company and the holders (the "Holders")
of approximately 12,000,000 shares of Common Stock issuable upon conversion of  
Preferred Stock or exercise of a warrant (the "Registrable Securities"), the    
Holders are entitled to certain rights with respect to the registration of      
such shares under the Securities Act. If the Company proposes to register any   
of its securities under the Securities Act, either for its own account or for   
the account of other security Holders exercising registration rights, such      
Holders are entitled to notice of such registration and are entitled to         
include shares of such Common Stock therein. Additionally, Holders of the       
Registrable Securities are also entitled to certain demand registration rights  
pursuant to which they may require the Company to file a registration           
statement under the Securities Act at the Company's expense with respect to     
their shares of Common Stock, and the Company is required to use its best       
efforts to effect such registration. Further, the Holders of such Registrable   
Securities may require the Company to file additional registration statements   
on Form S-3 at the Company's expense. All of these registration rights are      
subject to certain conditions and limitations, among them the right of the      
underwriters of an offering to limit the number of shares included in such      
registration and the right of the Company not to effect a requested             
registration within nine months following an offering of the Company's          
securities, including the offering made hereby.                                 

TRANSFER AGENT AND REGISTRAR                                                    

Boston Equiserve has been appointed as the transfer agent and registrar for 
the Company's Common Stock. Its telephone number for such purposes is (800)     
730-6001.                                                                       

CERTAIN ANTITAKEOVER EFFECTS                                                    

Certificate of Incorporation and Bylaws                                       

The Company's Amended and Restated Certificate of Incorporation (the        
"Certificate") provides that the Company's Board of Directors is classified     
into two classes of directors. See "Management--Classified Board." The Amended  
and Restated Certificate of Incorporation also provides that, upon the          
completion of this offering, stockholders can take action only at a duly        
called annual or special meeting of stockholders. Accordingly, stockholders of  
the Company will not be able to take action by written consent in lieu of a     
meeting. This provision may have the effect of deterring hostile takeovers or   
delaying changes in control or management of the Company.                       

The Amended and Restated Bylaws of the Company (i) permit only a majority of
the Board of Directors to call a special meeting of the stockholders and (ii)   
require prior notice of matters to be brought before meetings of the            
stockholders.                                                                   

Amendment                                                                     

The Certificate provides that the affirmative vote of the holders of at     
least two thirds of the shares entitled to vote, voting together as a single    
class, is required to amend provisions of the Certificate relating to           
stockholder action without a meeting and the calling of special meetings. The   
Certificate further provides that the related Bylaws described above            
(including the stockholder notice procedure) may be amended only by the         
Company's Board or by the affirmative vote of the holders of at least two       
thirds of the voting power of the outstanding shares entitled to vote.          

These provisions of the Amended and Restated Certificate of Incorporation   
and Amended and Restated Bylaws could discourage potential acquisition          
proposals and could delay or prevent a change in control of the Company. Such   
provisions also may have the effect of preventing changes in the management of  
the Company. See "Risk Factors--Certain Antitakeover Provisions."               

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Delaware Takeover Statute                                                     

The Company is subject to Section 203 of the Delaware General Corporation   
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware  
corporation from engaging in any business combination with any interested       
stockholder for a period of three years following the date that such            
stockholder became an interested stockholder, unless: (i) prior to such date,   
the board of directors of the corporation approved either the business          
combination or the transaction which resulted in the stockholder becoming an    
interested stockholder; (ii) upon consummation of the transaction which         
resulted in the stockholder becoming an interested stockholder, the interested  
stockholder owned at least 85% of the voting stock of the corporation           
outstanding at the time the transaction commenced, excluding, for purposes of   
determining the number of shares outstanding, those shares owned (x) by         
persons who are directors and also officers and (y) by employee stock plans in  
which employee participants do not have the right to determine confidentially   
whether shares held subject to the plan will be tendered in a tender or         
exchange offer; or (iii) on or subsequent to such date, the business            
combination is approved by the board of directors and authorized at an annual   
or special meeting of stockholders, and not by written consent, by the          
affirmative vote of at least two thirds of the outstanding voting stock which   
is not owned by the interested stockholder. Prior to the offering made hereby,  
each stockholder which is an interested stockholder of the Company became an    
interested stockholder in a transaction approved by the Company's Board of      
Directors. Therefore, Section 203 would not impose any restrictions on a        
business combination between the Company and any of its existing interested     
stockholders. However, the restrictions of Section 203 would apply to a         
business combination between the Company and any of its other stockholders who  
in the future becomes an interested stockholder in a transaction not aproved    
by the Company's Board of Directors, unless the business combination involving  
such stockholder is approved in advance by the Board of Directors.              

Section 203 defines business combination to include: (i) any merger or      
consolidation involving the corporation and the interested stockholder; (ii)    
any sale, transfer, pledge or other disposition involving the interested        
stockholder of 10% or more of the assets of the corporation; (iii) subject to   
certain exceptions, any transaction which results in the issuance or transfer   
by the corporation of any stock of the corporation to the interested            
stockholder; or (iv) the receipt by the interested stockholder of the benefit   
of any loans, advances, guarantees, pledges or other financial benefits         
provided by or through the corporation. In general, Section 203 defines an      
interested stockholder as any entity or person who is (i) the owner of 15% or   
more of the outstanding voting stock of the corporation or (ii) an affiliate    
or associate of the corporation and was the owner of 15% or more of the         
outstanding voting stock of the corporation at any time within the 3-year       
period immediately prior to the date on which it is sought to be determined     
whether such person is an interested stockholder; and the affiliates and        
associates of such person.                                                      

Limitation of Director and Officer Liability                                  

The Company's Amended and Restated Certificate of Incorporation and Bylaws  
contain certain provisions relating to the limitation of liability and          
indemnification of directors and officers. The Company's Amended and Restated   
Certificate of Incorporation provides that directors of the Company may not be  
held personally liable to the Company or its stockholders for a breach of       
fiduciary duty, except for liability (i) for any breach of the director's duty  
of loyalty to the Company or its stockholders, (ii) for acts or omissions not   
in good faith or which involve intentional misconduct or a knowing violation    
of the law, (iii) under Section 174 of the Delaware General Corporation Law,    
relating to prohibited dividends, distributions and repurchases or redemptions  
of stock, or (iv) for any transaction from which the director derives an        
improper benefit. In addition, the Company's Amended and Restated Certificate   
of Incorporation and Bylaws provide that the Company shall indemnify its        
directors and officers to the fullest extent authorized by Delaware law.        

Rights Plan                                                                   

On February 28, 1997, pursuant to a Preferred Shares Rights Agreement (the  
"Rights Agreement") between the Company, and Boston Equiserve, as Rights Agent  
(the "Rights Agent"), the Company's Board of Directors declared a dividend of   
one Right to purchase one one-thousandth share of the Company's Series E        
Preferred for                                                                   

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each outstanding share of Common Stock. The dividend is payable on April 1,     
1997 (the "Record Date") to stockholders of record as of the close of business  
on that day. Each Right entitles the registered holder to purchase from the     
Company one one-thousandth of a share of Series E Preferred at an exercise      
price of $125.00 (the "Purchase Price"), subject to adjustment.                 

The Rights will not be exercisable until the Distribution Date (defined     
below). Certificates for the Rights ("Rights Certificates") will not be sent    
to stockholders and the Rights will attach to and trade only together with the  
Common Stock. Accordingly, Common Stock certificates outstanding on the Record  
Date will evidence the Rights related thereto, and Common Stock certificates    
issued after the Record Date will contain a notation incorporating the Rights   
Agreement by reference. Until the Distribution Date (or earlier redemption or   
expiration of the Rights), the surrender or transfer of any certificates for    
Common Stock outstanding as of the Record Date, even without notation or a      
copy of the Summary of Rights being attached thereto, will also constitute the  
transfer of the Rights associated with the Common Stock represented by such     
certificate.                                                                    

The Rights will separate from the Common Stock, Rights Certificates will be 
issued and the Rights will become exercisable upon the earlier of: (i) 10 days  
(or such later date as may be determined by a majority of the Board of          
Directors, excluding directors affiliated with the Acquiring Person, as         
defined below (the "Continuing Directors")) following a public announcement     
that a person or group of affiliated or associated persons (an "Acquiring       
Person") has acquired, or obtained the right to acquire, beneficial ownership   
of 15% or more of the outstanding shares of Common Stock; or (ii) 10 business   
days (or such later date as may be determined by a majority of the Continuing   
Directors) following the commencement of, or announcement of an intention to    
make, a tender offer or exchange offer the consummation of which would result   
in the beneficial ownership by a person or group of 15% or more of the          
outstanding Common Stock. The earlier of such dates is referred to as the       
"Distribution Date."                                                            

As soon as practicable following the Distribution Date, separate Rights     
Certificates will be mailed to holders of record of the Common Shares as of     
the close of business on the Distribution Date and such separate Rights         
Certificates alone will evidence the Rights from and after the Distribution     
Date. The Rights will expire on the earliest of (i) March 21, 2007 (the "Final  
Expiration Date") or (ii) redemption or exchange of the Rights as described     
below.                                                                          

Following the Distribution Date, and until one of the further events        
described below, holders of the Rights will be entitled to receive, upon        
exercise and the payment of the Purchase Price, one one-thousandth of a share   
of the Series E Preferred Stock.                                                

Unless the Rights are earlier redeemed, in the event that an Acquiring      
Person becomes the beneficial owner of 15% or more of the Company's Common      
Stock then outstanding, then proper provision will be made so that each holder  
of a Right which has not theretofore been exercised (other than Rights          
beneficially owned by the Acquiring Person or any affiliate of the Acquiring    
Person, which will thereafter be void) will thereafter have the right to        
receive, upon exercise, shares of Common Stock having a value equal to two      
times the Purchase Price. In the event that the Company does not have           
sufficient Common Stock available for all Rights to be exercised, or the Board  
decides that such action is necessary and not contrary to the interests of      
Rights holders, the Company may instead substitute cash, assets or other        
securities for the Common Stock for which the Rights would have been            
exercisable.                                                                    

Similarly, unless the Rights are earlier redeemed, in the event that, after 
an Acquiring Person becomes the beneficial owner of 15% or more of the          
Company's Common Stock then outstanding, (i) the Company is acquired in a       
merger or other business combination transaction, or (ii) 50% or more of the    
Company's consolidated assets or earning power are sold (other than in          
transactions in the ordinary course of business), proper provision must be      
made so that each holder of a Right which has not theretofore been exercised    
(other than Rights beneficially owned by the Acquiring Person or any affiliate  
of the Acquiring Person, which will thereafter be void) will thereafter have    
the right to receive, upon exercise, shares of common stock of the acquiring    
company having a value equal to two times the Purchase Price.                   

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At any time after the acquisition by an Acquiring Person of beneficial      
ownership of 15% or more of the Company's outstanding shares of Common Stock    
and prior to the acquisition by any person or entity of beneficial ownership    
of 50% or more of the Company's outstanding shares of Common Stock, the Board   
of Directors of the Company may exchange the Rights (other than Rights owned    
by the Acquiring Person), in whole or in part, at an exchange ratio of one      
Common Share per Right.                                                         

At any time on or prior to the close of business on the earlier of (i) the  
10th day following the acquisition by an Acquiring Person of beneficial         
ownership of 15% or more of the Company's Common Stock or such later date as    
may be determined by a majority of the Continuing Directors and publicly        
announced by the Company, or (ii) the Final Expiration Date of the Rights, the  
Company may redeem the Rights in whole, but not in part, at a price of $0.001   
per Right.                                                                      

The Purchase Price payable, the number of Rights, and the number of Series E
Preferred or Common Stock or other securities or property issuable upon         
exercise of the Rights are subject to adjustment from time to time in           
connection with dilutive issuances by the Company as set forth in the Rights    
Agreement. With certain exceptions, no adjustment in the Purchase Price will    
be required until cumulative adjustments require an adjustment of at least 1%   
in such Purchase Price.                                                         

No fractional portion less than integral multiples of one share of Common   
Stock or one one-thousandth of a share of Series E Preferred will be issued     
upon exercise of a Right and in lieu thereof, an adjustment in cash will be     
made based on the market price of the security to be so issued on the last      
trading date prior to the date of exercise.                                     

Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company (other than any rights resulting from such      
holder's ownership of Common Stock), including, without limitation, the right   
to vote or to receive dividends.                                                

The provisions of the Rights Agreement may be supplemented or amended by the
Board of Directors in any manner prior to the close of business on the date     
the Rights separate from the Common Stock and become exercisable. After such    
date, the provisions of the Rights Agreement may be amended by the Board in     
order to cure any ambiguity, defect or inconsistency, to make changes which do  
not adversely affect the interests of holders of Rights (excluding the          
interests of any Acquiring Person), or to shorten or lengthen any time period   
under the Rights Agreement; provided, however, that no amendment to adjust the  
time period governing redemption shall be made at such time as the Rights are   
not redeemable.                                                                 

Series E Preferred purchasable upon exercise of the Rights will not be      
redeemable. Each share of Series E Preferred will be entitled to an aggregate   
dividend of 1,000 times the dividend declared per Common Share. In the event    
of liquidation, the holders of the Series E Preferred will be entitled to       
1,000 times the amount paid per share of Common Stock plus an amount equal to   
accrued and unpaid dividends and distributions thereon, whether or not          
declared, to the date of such payment. Each share of Series E Preferred will    
have 1,000 votes, voting together with the Common Stock. These rights are       
protected by customary anti-dilution provisions.                                

Because of the nature of the dividend, liquidation and voting rights of the 
shares of Series E Preferred, the value of the one one-thousandth interest in   
a share of Series E Preferred purchasable upon exercise of each Right should    
approximate the value of one share of Common Stock.                             

The Rights approved by the Board are designed to protect and maximize the   
value of the outstanding equity interests in the Company in the event of an     
unsolicited attempt by an acquiror to take over the Company, in a manner or on  
terms not approved by the Board of Directors. Takeover attempts frequently      
include coercive tactics to deprive the Company's Board of Directors and its    
stockholders of any real opportunity to determine the destiny of the Company.   
The Rights have been declared by the Board in order to deter such tactics,      
including a gradual accumulation of shares in the open market of a 15% or       
greater position to be followed by a merger or a partial or two-tier tender     
offer that does not treat all stockholders equally. These tactics unfairly      
pressure                                                                        

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stockholders, squeeze them out of their investment without giving them any      
real choice and deprive them of the full value of their shares.                 

The Rights are not intended to prevent a takeover of the Company and will   
not do so. The Rights may be redeemed by the Company at $0.001 per Right        
within ten days (or such later date as may be determined by a majority of the   
Continuing Directors) after the accumulation of 15% or more of the Company's    
shares by a single acquiror or group. Accordingly, the Rights should not        
interfere with any merger or business combination approved by the Board of      
Directors.                                                                      

Issuance of the Rights does not in any way weaken the financial strength of 
the Company or interfere with its business plans. The issuance of the Rights    
themselves has no dilutive effect, will not affect reported earnings per        
share, should not be taxable to the Company or to its stockholders and will     
not change the way in which the Company's shares are presently traded. The      
Company's Board of Directors believes that the Rights represent a sound and     
reasonable means of addressing the complex issues of corporate policy created   
by the current takeover environment.                                            

However, the Rights may have the effect of rendering more difficult or      
discouraging an acquisition of the Company deemed undesirable by the Board of   
Directors. The Rights may cause substantial dilution to a person or group that  
attempts to acquire the Company on terms or in a manner not approved by the     
Company's Board of Directors, except pursuant to an offer conditioned upon the  
negation, purchase or redemption of the Rights.                                 

Intel Agreement                                                               

The Intel Contract grants to Intel certain rights to make a competing offer 
if Rambus commences negotiations with any third party to enter into a           
transaction (i) after which such third party would beneficially own more than   
50% of the voting power of Rambus, (ii) in which Rambus would be a party to a   
merger with such third party and Rambus would not be the surviving corporation  
or (iii) Rambus would transfer all or substantially all of its business and     
assets to the third party. The Intel Contract does not require that Rambus      
accept any such competing offer from Intel. However, should Rambus complete     
such a transaction with a third party after receiving from Intel a bona fide    
offer including money and other consideration at least equal to the money and   
other consideration included in the third party offer, and on other terms and   
conditions at least as favorable as those included in the third party offer,    
then certain of Intel's royalty obligations would cease, the Company would be   
obligated to refund to Intel certain previously paid royalties, and the         
license of Rambus technology to Intel under the Intel Contract would become     
fully paid, irrevocable and would survive any termination of the Intel          
Contract. This provision of the Intel Contract may significantly discourage     
future acquisition attempts, even where such acquisitions might be in the best  
interest of Rambus stockholders. This provision of the Intel Contract will      
terminate if Intel fails to maintain a specified level of shipments of Rambus   
compatible ICs after a specified date. See "Certain Transactions--1996          
Transactions with Intel Corporation."                                           

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SHARES ELIGIBLE FOR FUTURE SALE 

Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the      
public market could adversely affect prevailing market prices from time to      
time. Furthermore, since only a limited number of shares will be available for  
sale shortly after this offering because of certain contractual and legal       
restrictions on resale (as described below), sales of substantial amounts of    
Common Stock of the Company in the public market after the restrictions lapse   
could adversely affect the prevailing market price and the ability of the       
Company to raise equity capital in the future.                                  

Upon completion of this offering the Company will have outstanding an       
aggregate of 21,453,651 shares of Common Stock (based upon shares outstanding   
at March 31, 1997), assuming no exercise of the Underwriters' over-allotment    
option and no exercise of outstanding options. Of these shares, all of the      
shares sold in this offering will be freely tradeable without restriction or    
further registration under the Securities Act, unless such shares are           
purchased by "affiliates" of the Company as that term is defined in Rule 144    
under the Securities Act (the "Affiliates"). The remaining 18,703,651 shares    
of Common Stock held by existing stockholders are "restricted securities" as    
that term is defined in Rule 144 under the Securities Act ("Restricted          
Shares"). Restricted Shares may be sold in the public market only if            
registered or if they qualify for an exemption from registration under Rules    
144, 144(k) or 701 promulgated under the Securities Act, which rules are        
summarized below. As a result of the contractual restrictions described below   
and the provisions of Rules 144, 144(k) and 701, the Restricted Shares will be  
available for sale in the public market as follows: (i) 25,000 shares will be   
eligible for immediate sale on the date of this Prospectus; and (ii)            
18,678,651 shares will be eligible for sale upon expiration of the lock-up      
agreements at least 180 days after the date of this Prospectus.                 

All officers, directors and option holders and substantially all            
stockholders of the Company have agreed not to sell or otherwise transfer any   
shares of Common Stock or any other securities of the Company for a period of   
at least 180 days after the date of this Prospectus (without, in most cases,    
the prior written consent of Morgan Stanley & Co. Incorporated).                

In general, under Rule 144 as it will be in effect upon the completion of   
the offering, beginning 90 days after the date of this Prospectus, a person     
(or persons whose shares are aggregated) who has beneficially owned Restricted  
Shares for at least one year (including the holding period of any prior owner   
except an Affiliate) would be entitled to sell within any three-month period a  
number of shares that does not exceed the greater of: (i) one percent of the    
number of shares of Common Stock then outstanding (which will equal             
approximately 214,536 shares immediately after this offering); or (ii) the      
average weekly trading volume of the Common Stock on the Nasdaq National        
Market during the four calendar weeks preceding the filing of a notice on Form  
144 with respect to such sale. Sales under Rule 144 are also subject to         
certain manner of sale provisions and notice requirements and to the            
availability of current public information about the Company. Under Rule        
144(k), a person who is not deemed to have been an Affiliate of the Company at  
any time during the 90 days preceding a sale, and who has beneficially owned    
the shares proposed to be sold for at least two years (including the holding    
period of any prior owner except an Affiliate), is entitled to sell such        
shares without complying with the manner of sale, public information, volume    
limitation or notice provisions of Rule 144; therefore, unless otherwise        
restricted, "144(k) shares" may therefore be sold immediately upon the          
completion of this offering. In general, under Rule 701 of the Securities Act   
as currently in effect, any employee, consultant or advisor of the Company who  
purchases shares from the Company in connection with a compensatory stock or    
option plan or other written agreement is eligible to resell such shares 90     
days after the effective date of this offering in reliance on Rule 144, but     
without compliance with certain restrictions, including the holding period,     
contained in Rule 144.                                                          

Upon completion of this offering, the holders of 12,296,822 shares of Common
Stock issuable upon conversion of Preferred Stock or exercise of a warrant, or  
their transferees, will be entitled to certain rights with respect to the       
registration of such shares under the Securities Act. See "Description of       
Capital Stock-- Registration Rights." Registration of such shares under the     
Securities Act would result in such shares becoming freely tradeable without    
restriction under the Securities Act (except for shares purchases by            
affiliates) immediately upon the effectiveness of such registration.            

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The Company intends to file a registration statement under the Securities   
Act covering shares of Common Stock reserved for issuance under the Company's   
1997 Stock Plan and Stock Purchase Plan and shares subject to outstanding       
options under the 1990 Plan. See "Management--Stock Plans." Such registration   
statement is expected to be filed and become effective as soon as practicable   
after the effective date of this offering. Accordingly, shares registered       
under such registration statement will, subject to Rule 144 volume limitations  
applicable to Affiliates, be available for sale in the open market, unless      
such shares are subject to vesting restrictions with the Company or the lock-   
up agreements described above. As of March 31, 1997, options to purchase        
2,174,470 shares of Common Stock were issued and outstanding under the 1990     
Plan, and no options to purchase shares had been granted under the Company's    
1997 Plan and 1997 Stock Purchase Plan. Subsequent to March 31, 1997 the Board  
of Directors granted options to purchase an additional 246,500 shares of        
Common Stock at a weighted average exercise price of $8.00 per share under the  
1990 Plan. See "Management--Director Compensation" and "--Stock Plans."         

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UNDERWRITERS  

Under the terms and subject to the conditions contained in an Underwriting  
Agreement dated the date hereof, the Underwriters named below (the              
"Underwriters"), for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist  
LLC and Robertson, Stephens & Company LLC are serving as Representatives (the   
"Representatives"), have severally agreed to purchase, and the Company has      
agreed to sell to them severally the respective number of shares of Common      
Stock set forth opposite their respective names below:                          

                                                                [Download Table]

                                                                    NUMBER OF
     NAME                                                            SHARES  
     ----                                                           ---------
                                                                             
Morgan Stanley & Co. Incorporated..................................   753,334
Hambrecht & Quist LLC..............................................   753,333
Robertson, Stephens & Company LLC..................................   753,333
Alex. Brown & Sons Incorporated....................................    80,000
Cowen & Company....................................................    50,000
A.G. Edwards & Sons, Inc...........................................    80,000
EVEREN Securities, Inc.............................................    50,000
Janney Montgomery Scott Inc........................................    50,000
Needham & Company, Inc.............................................    50,000
PaineWebber Incorporated...........................................    80,000
SoundView Financial Group, Inc.....................................    50,000
                                                                    ---------
  Total............................................................ 2,750,000
                                                                    =========

The Underwriting Agreement provides that the obligations of the several     
Underwriters to pay for and accept delivery of the shares of Common Stock       
offered hereby are subject to the approval of certain legal matters by counsel  
and to certain other conditions. The Underwriters are obligated to take and     
pay for all of the shares of Common Stock offered hereby (other than those      
covered by the over-allotment option described below) if any are taken.         

The Underwriters initially propose to offer part of the shares of Common    
Stock offered hereby directly to the public at the initial public offering      
price set forth on the cover page hereof and part to certain dealers at a       
price which represents a concession not in excess of $0.50 per share under the  
initial public offering price. The Underwriters may allow, and such dealers     
may re-allow, a concession not in excess of $0.10 per share to other            
Underwriters or to certain other dealers.                                       

Pursuant to the Underwriting Agreement, the Company has granted to the      
Underwriters an option, exercisable for 30 days from the date of this           
Prospectus, to purchase up to an additional 412,500 shares of Common Stock at   
the initial public offering price set forth on the cover page hereof, less      
underwriting discounts and commissions. The Underwriters may exercise such      
option to purchase solely for the purpose of covering over-allotments, if any,  
incurred in the sale of the shares of Common Stock offered hereby. To the       
extent such option is exercised, each Underwriter will become obligated,        
subject to certain conditions, to purchase approximately the same percentage    
of such additional shares as the number set forth next to such Underwriter's    
name in the preceding table bears to the total number of shares of Common       
Stock offered hereby.                                                           

The Representatives have informed the Company that the Underwriters do not  
intend to confirm sales in excess of five percent of the number of shares of    
Common Stock offered hereby to accounts over which they exercise discretionary  
authority.                                                                      

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.            

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See "Shares Eligible for Future Sale" for a description of certain          
arrangements by which all officers, directors and option holders and            
substantially all stockholders of the Company have agreed not to sell or        
otherwise dispose of Common Stock or other securities of the Company for up to  
at least 180 days after the date of this Prospectus (without, in most cases,    
the prior consent of Morgan Stanley & Co. Incorporated). The Company has        
agreed in the Underwriting Agreement that it will not, directly or indirectly,  
without the prior written consent of Morgan Stanley & Co. Incorporated, offer,  
pledge, sell, contract to sell, sell any option or contract to purchase,        
purchase any option or contract to sell, grant any option, right or warrant to  
purchase, or otherwise transfer or dispose of any shares of Common Stock or     
any securities convertible into or exchangeable for Common Stock, for a period  
of 180 days after the date of this Prospectus, except under certain             
circumstances.                                                                  

In order to facilitate the offering of the Common Stock, the Underwriters   
may engage in transactions that stabilize, maintain or otherwise affect the     
price of the Common Stock. Specifically, the Underwriters may over-allot in     
connection with the offering, creating a short position in the Common Stock     
for their own account. In addition, to cover over-allotments or to stabilize    
the price of the Common Stock, the Underwriters may bid for, and purchase,      
shares of Common Stock in the open market. Finally, the underwriting syndicate  
may reclaim selling concessions allowed to an underwriter or a dealer for       
distributing the Common Stock in the offering, if the syndicate repurchases     
previously distributed Common Stock in transactions to cover syndicate short    
positions, in stabilization transactions or otherwise. Any of these activities  
may stabilize or maintain the market price of the Common Stock above            
independent market levels. The Underwriters are not required to engage in       
these activities, and may end any of these activities at any time.              

Morgan Stanley Group Inc., which is associated with Morgan Stanley & Co.    
Inc., is a limited partner of the general partner of Integral Capital           
Partners, L.P. and Integral Capital Partners, C.V., which in the aggregate      
will own 1,045,599 shares, or 4.9% of the outstanding capital stock of the      
Company, upon the closing of the offering. Morgan Stanley & Co. Inc. disclaims  
beneficial ownership of the shares held by Integral Capital Partners, L.P. and  
Integral Capital Partners, C.V., except to the extent of any pecuniary          
interest therein.                                                               

PRICING OF THE OFFERING                                                         

Prior to this offering, there has been no public market for the Common Stock
of the Company. The initial public offering price has been determined by        
negotiations between the Company and the Representatives. Among the factors     
considered in determining the initial public offering price were the future     
prospects of the Company and its industry in general, sales, earnings and       
certain other financial and operating information of the Company in recent      
periods, and the price-earnings ratios, price-sales ratios, market prices of    
securities and certain financial and operating information of companies         
engaged in activities similar to those of the Company.                          

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LEGAL MATTERS 

The validity of the Common Stock offered hereby will be passed upon for the 
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650      
Page Mill Road, Palo Alto, California 94304. Certain legal matters in           
connection with the offering will be passed upon for the Underwriters by        
Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306.          

EXPERTS 

The consolidated financial statements and schedule of the Company at        
September 30, 1995 and 1996 and for each of the three years in the period       
ended September 30, 1996 appearing in this Prospectus and Registration          
Statement have been audited by Coopers & Lybrand L.L.P., independent auditors,  
as set forth in their report thereon appearing elsewhere herein and in the      
Registration Statement, and are included in reliance upon such report given     
upon the authority of such firm as experts in accounting and auditing.          

ADDITIONAL INFORMATION  

The Company has filed with the Securities and Exchange Commission (the      
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1     
under the Securities Act with respect to the shares of Common Stock offered     
hereby. This Prospectus does not contain all of the information set forth in    
the Registration Statement and the exhibits and schedules thereto. Certain      
items are omitted in accordance with the rules and regulations of the           
Commission. For further information with respect to the Company and the Common  
Stock offered hereby, reference is made to the Registration Statement and the   
exhibits and schedules filed therewith. Statements contained in this            
Prospectus as to the contents of any contract or any other document referred    
to are not necessarily complete, and, in each instance, reference is made to    
the copy of such contract or other document filed as an exhibit to the          
Registration Statement, each such statement being qualified in all respects by  
such reference. A copy of the Registration Statement, and the exhibits and      
schedules thereto, may be inspected without charge at the public reference      
facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W.,   
Washington, D.C. 20549, and at the Commission's regional offices located at     
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,   
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York     
10048, and copies of all or any part of the Registration Statement may be       
obtained from such offices upon the payment of the fees prescribed by the       
Commission. The Commission maintains a World Wide Web site that contains        
reports, proxy and information statements and other information regarding       
registrants that file electronically with the Commission. The address of the    
site is http://www.sec.gov.                                                     

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RAMBUS INC. 

CONSOLIDATED FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                            PAGE
                                                                            ----
                                                                                
Report of Independent Accountants.......................................... F-2 
Consolidated Balance Sheets................................................ F-3 
Consolidated Statements of Operations...................................... F-4 
Consolidated Statements of Stockholders' Deficit........................... F-5 
Consolidated Statements of Cash Flows...................................... F-6 
Notes to Consolidated Financial Statements................................. F-7 

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors and Stockholders                                      
Rambus Inc. and Subsidiary                                                      

We have audited the accompanying consolidated balance sheets of Rambus Inc. 
and Subsidiary as of September 30, 1995 and 1996, and the related consolidated  
statements of operations, stockholders' deficit and cash flows for each of the  
three years in the period ended September 30, 1996. These financial statements  
are the responsibility of the Company's management. Our responsibility is to    
express an opinion on these financial statements based on our audits.           

We conducted our audits in accordance with generally accepted auditing      
standards. Those standards require that we plan and perform the audit to        
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the consolidated financial position of Rambus Inc.    
and Subsidiary as of September 30, 1995 and 1996, and the results of their      
operations and their cash flows for each of the three years in the period       
ended September 30, 1996 in conformity with generally accepted accounting       
principles.                                                                     

                            Coopers & Lybrand L.L.P.

San Jose, California                                                            
November 1, 1996, except for Note 17                                            
for which the date is                                                         
March 31, 1997.                                                               

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RAMBUS INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                                [Download Table]

                                                                        PRO FORMA
                                                                        (NOTE 16)
                                           SEPTEMBER 30,                  MARCH  
                                         ------------------  MARCH 31,     31,   
                                           1995      1996      1997       1997   
                                         --------  --------  ---------  ---------
                                                                 (UNAUDITED)     
                                                                                 
                ASSETS                                                           
Current assets:                                                                  
  Cash and cash equivalents............  $    977  $    742  $  1,210            
  Marketable securities................    13,173     7,812     9,282            
  Accounts receivable..................     1,206       718     7,330            
  Prepaids and other current assets....       840       873     1,357            
                                         --------  --------  --------            
    Total current assets...............    16,196    10,145    19,179            
Property and equipment, net............     1,598     2,340     3,144            
Investment.............................        --        --     1,129            
Other assets...........................       513       383       391            
                                         --------  --------  --------            
    Total assets.......................  $ 18,307  $ 12,868  $ 23,843            
                                         ========  ========  ========            
              LIABILITIES                                                        
Current liabilities:                                                             
  Accounts and taxes payable, accrued                                            
   payroll and other liabilities.......  $  1,113  $  1,237  $  1,844            
  Current portion of:                                                            
   Capital lease obligations...........       929       753       551            
   Deferred revenue....................     9,721    13,082    17,910            
                                         --------  --------  --------            
    Total current liabilities..........    11,763    15,072    20,305            
Capital lease obligations, less current                                          
 portion...............................       687       544       296            
Deferred revenue, less current                                                   
 portion...............................    13,793     9,396    14,307            
                                         --------  --------  --------            
    Total liabilities..................    26,243    25,012    34,908            
                                         --------  --------  --------            
Commitments (Note 9)                                                             
         STOCKHOLDERS' DEFICIT                                                   
Convertible preferred stock, $.001 par                                           
 value:                                                                          
  Authorized: 11,336,096 shares;                                                 
  Issued and outstanding: 11,296,822                                             
   shares at September 30, 1995 and                                              
   1996 and March 31, 1997 and no                                                
   shares pro forma....................        11        11        11            
  (Liquidation value: $19,894 at                                                 
   September 30, 1995 and 1996 and                                               
   March 31, 1997 and none pro forma)                                            
Common stock, $.001 par value:                                                   
  Authorized: 22,500,000 shares;                                                 
  Issued and outstanding: 5,561,082                                              
   shares at September 30, 1995,                                                 
   5,758,749 shares at September 30,                                             
   1996, 7,406,829 shares at March 31,                                           
   1997 and 18,703,651 shares pro                                                
   forma...............................         6         6         7   $     18 
Additional paid-in capital.............    22,095    22,330    23,809     23,809 
Stockholders' notes receivable.........        --        --      (733)      (733)
Accumulated deficit....................   (30,077)  (34,492)  (34,104)   (34,104)
Cumulative translation adjustment......        29         1       (55)       (55)
                                         --------  --------  --------   -------- 
    Total stockholders' deficit........    (7,936)  (12,144)  (11,065)  $(11,065)
                                         --------  --------  --------   ======== 
      Total liabilities and                                                      
       stockholders' deficit...........  $ 18,307  $ 12,868  $ 23,843            
                                         ========  ========  ========            

The accompanying notes are an integral part of these consolidated financial 
statements. 

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RAMBUS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS 
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                [Download Table]

                                                            SIX MONTHS ENDED   
                               YEAR ENDED SEPTEMBER 30,         MARCH 31,      
                              ----------------------------  ------------------ 
                                1994      1995      1996      1996      1997   
                              --------  --------  --------  --------  -------- 
                                                               (UNAUDITED)     
                                                                               
Contract revenues...........  $  5,000  $  7,364  $ 11,205  $  5,072  $  8,467 
Royalties...................        --        --        65        --     2,958 
                              --------  --------  --------  --------  -------- 
    Total revenues..........     5,000     7,364    11,270     5,072    11,425 
                              --------  --------  --------  --------  -------- 
Costs and expenses:                                                            
  Cost of contract                                                             
   revenues.................     3,844     5,236     4,821     2,301     2,396 
  Research and development..     3,067     3,117     5,218     2,413     4,368 
  Sales and marketing.......     2,569     3,376     4,052     1,781     2,867 
  General and                                                                  
   administrative...........     1,717     1,688     1,747       833     1,278 
                              --------  --------  --------  --------  -------- 
                                11,197    13,417    15,838     7,328    10,909 
                              --------  --------  --------  --------  -------- 
    Operating income                                                           
     (loss).................    (6,197)   (6,053)   (4,568)   (2,256)      516 
Interest and other income,                                                     
 net........................       215       619       737       359       262 
Interest expense............      (296)     (297)     (298)     (155)     (137)
                              --------  --------  --------  --------  -------- 
    Income (loss) before                                                       
     income taxes...........    (6,278)   (5,731)   (4,129)   (2,052)      641 
Provision for income taxes..       351     1,289       286       183       253 
                              --------  --------  --------  --------  -------- 
    Net income (loss).......  $ (6,629) $ (7,020) $ (4,415) $ (2,235) $    388 
                              ========  ========  ========  ========  ======== 
Net income (loss) per                                                          
 share......................  $  (1.29) $  (1.24) $  (0.73) $  (0.37) $   0.02 
                              ========  ========  ========  ========  ======== 
Number of shares used in per                                                   
 share calculations.........     5,124     5,665     6,088     6,047    20,083 
                              ========  ========  ========  ========  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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RAMBUS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996 
AND FOR THE SIX MONTHS ENDED MARCH 31, 1997 
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                            CONVERTIBLE                                                                               
                          PREFERRED STOCK    COMMON STOCK   ADDITIONAL STOCKHOLDERS'             CUMULATIVE           
                          -----------------  --------------  PAID-IN       NOTES     ACCUMULATED TRANSLATION          
                          SHARES    AMOUNT   SHARES  AMOUNT  CAPITAL    RECEIVABLE     DEFICIT   ADJUSTMENT   TOTAL   
                          --------- -------  ------  ------ ---------- ------------- ----------- ----------- -------- 
                                                                                                                      
Balances, September 30,                                                                                               
 1993...................      7,697  $    8  4,067    $ 4    $ 8,049       $  --      $(16,427)     $ 15     $ (8,351)
 Issuance of common                                                                                                   
  stock upon exercise of                                                                                              
  options...............         --      --  1,248      1        226          --            --        --          227 
 Repurchase of common                                                                                                 
  stock for cash........         --      --   (165)    --         (6)         --            --        --           (6)
 Issuance of Series B                                                                                                 
  preferred stock.......        467      --     --     --        999          --            --        --          999 
 Issuance of Series C                                                                                                 
  preferred stock, net                                                                                                
  of issuance costs of                                                                                                
  $7....................      1,250       1     --     --      3,742          --            --        --        3,743 
 Foreign currency                                                                                                     
  translation                                                                                                         
  adjustments...........         --      --     --     --         --          --            --        12           12 
 Net loss...............         --      --     --     --         --          --        (6,630)       --       (6,630)
                          ---------  ------  -----    ---    -------       -----      --------      ----     -------- 
Balances, September 30,                                                                                               
 1994...................      9,414       9  5,150      5     13,010          --       (23,057)       27      (10,006)
 Issuance of common                                                                                                   
  stock upon exercise of                                                                                              
  options...............         --      --    499      1        189          --            --        --          190 
 Issuance of Series D                                                                                                 
  preferred stock, net                                                                                                
  of issuance costs of                                                                                                
  $35...................      1,883       2     --     --      7,963          --            --        --        7,965 
 Repurchase of common                                                                                                 
  stock for cash........         --      --    (88)    --         (3)         --            --        --           (3)
 Sale of Series A                                                                                                     
  preferred stock                                                                                                     
  purchase rights.......         --      --     --     --        936          --            --        --          936 
 Foreign currency                                                                                                     
  translation                                                                                                         
  adjustments...........         --      --     --     --         --          --            --         2            2 
 Net loss...............         --      --     --     --         --          --        (7,020)       --       (7,020)
                          ---------  ------  -----    ---    -------       -----      --------      ----     -------- 
Balances, September 30,                                                                                               
 1995...................     11,297      11  5,561      6     22,095          --       (30,077)       29       (7,936)
 Issuance of common                                                                                                   
  stock upon exercise of                                                                                              
  options...............         --      --    212     --        239          --            --        --          239 
 Repurchase of common                                                                                                 
  stock for cash........         --      --    (14)    --         (4)         --            --        --           (4)
 Foreign currency                                                                                                     
  translation                                                                                                         
  adjustments...........         --      --     --     --         --          --            --       (28)         (28)
 Net loss...............         --      --     --     --         --          --        (4,415)       --       (4,415)
                          ---------  ------  -----    ---    -------       -----      --------      ----     -------- 
Balances, September 30,                                                                                               
 1996...................     11,297      11  5,759      6     22,330          --       (34,492)        1      (12,144)
 Issuance of common                                                                                                   
  stock upon exercise of                                                                                              
  options...............         --      --  1,648      1      1,479        (733)           --        --          747 
 Foreign currency                                                                                                     
  translation                                                                                                         
  adjustments...........         --      --     --     --         --          --            --       (56)         (56)
 Net income.............         --      --     --     --         --          --           388        --          388 
                          ---------  ------  -----    ---    -------       -----      --------      ----     -------- 
Balances, March 31, 1997                                                                                              
 (unaudited)............     11,297  $   11  7,407    $ 7    $23,809       $(733)     $(34,104)     $(55)    $(11,065)
                          =========  ======  =====    ===    =======       =====      ========      ====     ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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RAMBUS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS)

                                                                [Download Table]

                                                             SIX MONTHS ENDED  
                                YEAR ENDED SEPTEMBER 30,        MARCH 31,      
                               ----------------------------  ----------------- 
                                 1994      1995      1996     1996      1997   
                               --------  --------  --------  -------  -------- 
                                                               (UNAUDITED)     
                                                                               
Cash flows from operating                                                      
 activities:                                                                   
  Net income (loss)........... $ (6,629) $ (7,020) $ (4,415) $(2,235) $    388 
  Adjustments to reconcile net                                                 
   income (loss) to net cash                                                   
   provided by (used in)                                                       
   operating activities:                                                       
    Depreciation and                                                           
     amortization.............    1,670     1,552     1,194      570       820 
    Other.....................      (37)       36        82       38        29 
    Change in operating assets                                                 
     and liabilities:                                                          
      Accounts receivable.....      895    (1,096)      488      117    (6,612)
      Prepaids and other                                                       
       current assets.........      409      (226)      (33)    (283)     (484)
      Other assets............      225       191       130       18        (8)
      Accounts and taxes                                                       
       payable, accrued                                                        
       payroll and other                                                       
       liabilities............     (325)     (243)       54       83       568 
      Deferred revenue........    1,990     8,096    (1,036)   1,748     8,539 
                               --------  --------  --------  -------  -------- 
        Net cash provided by                                                   
         (used in) operating                                                   
         activities...........   (1,802)    1,290    (3,536)      56     3,240 
                               --------  --------  --------  -------  -------- 
Cash flows from investing                                                      
 activities:                                                                   
  Purchase of property and                                                     
   equipment..................     (450)   (1,227)   (1,952)    (998)   (1,553)
  Proceeds from sale of                                                        
   property and equipment.....      350       516       467      147        -- 
  Purchases of marketable                                                      
   securities.................  (12,501)  (27,611)  (20,050) (12,692)  (11,735)
  Maturities of marketable                                                     
   securities.................    9,000    17,939    25,410   13,229    10,265 
                               --------  --------  --------  -------  -------- 
        Net cash provided by                                                   
         (used in) investing                                                   
         activities...........   (3,601)  (10,383)    3,875     (314)   (3,023)
                               --------  --------  --------  -------  -------- 
Cash flows from financing                                                      
 activities:                                                                   
  Issuance of Series B                                                         
   preferred stock............    1,000        --        --       --        -- 
  Issuance of Series C                                                         
   preferred stock............    3,743        --        --       --        -- 
  Issuance of Series D                                                         
   preferred stock............       --     7,965        --       --        -- 
  Sale of convertible                                                          
   preferred stock purchase                                                    
   rights.....................       --       936        --       --        -- 
  Issuance of common stock....      227       189       239       98       747 
  Repurchase of common stock..       (6)       (3)       (4)      --        -- 
  Proceeds from bank loans....       --        --        --       --       794 
  Principal payments on bank                                                   
   loans......................       --        --        --       --      (794)
  Principal payments on                                                        
   capital lease obligations..     (486)     (565)     (781)    (318)     (440)
                               --------  --------  --------  -------  -------- 
        Net cash provided by                                                   
         (used in) financing                                                   
         activities...........    4,478     8,522      (546)    (220)      307 
                               --------  --------  --------  -------  -------- 
Foreign currency translation                                                   
 adjustment...................       12         2       (28)     (16)      (56)
                               --------  --------  --------  -------  -------- 
Net (decrease) increase in                                                     
 cash and cash equivalents....     (913)     (569)     (235)    (494)      468 
Cash and cash equivalents at                                                   
 beginning of period..........    2,459     1,546       977      977       742 
                               --------  --------  --------  -------  -------- 
Cash and cash equivalents at                                                   
 end of period................ $  1,546  $    977  $    742  $   483  $  1,210 
                               ========  ========  ========  =======  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

1. FORMATION AND BUSINESS OF THE COMPANY:                                       

Rambus Inc. and Subsidiary (the Company) designs, develops, licenses and    
markets high-speed chip-to-chip interface technology to enhance the             
performance and cost-effectiveness of consumer electronics, computer systems    
and other electronic systems. The Company licenses semiconductor companies to   
manufacture and sell memory and logic ICs incorporating Rambus interface        
technology and markets its solution to systems vendors to encourage them to     
design Rambus interface technology into their products. The Company's           
technology cost-effectively increases the data transfer rate, or memory         
bandwidth, allowing semiconductor memory devices to keep pace with faster       
generations of processors and controllers and thus supports the accelerating    
data transfer requirements of multimedia and other high-bandwidth               
applications.                                                                   

The Company was incorporated on March 9, 1990 in California. In March 1997, 
the Company was reincorporated in Delaware. Note 17 sets out the details of     
the reincorporation.                                                            

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                  

Financial Statement Presentation:                                             

The accompanying consolidated financial statements include the accounts of  
the Company and its wholly owned subsidiary, Rambus K.K., located in Tokyo,     
Japan. All intercompany accounts and transactions have been eliminated in the   
accompanying consolidated financial statements. Identifiable assets and         
revenues of the subsidiary are not significant.                                 

Certain reclassifications have been made to the fiscal 1994 financial       
statement amounts to conform to the fiscal 1995 and 1996 presentation. The      
reclassifications have no effect on previously reported net loss,               
stockholders' deficit, total assets or total liabilities.                       

Use of Estimates:                                                             

The preparation of financial statements in conformity with generally        
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

Revenue Recognition:                                                          

The Company has entered into nonexclusive technology agreements with        
semiconductor licensees. These agreements provide a license to use the          
Company's proprietary technology and to receive engineering implementation      
services, customer support, and enhancements.                                   

The Company delivers to a new licensee an implementation package which      
contains all the information needed to develop a Rambus chip in the licensee's  
process. An implementation package includes a specification, a generalized      
circuit layout database software for the particular version of the chip which   
the licensee intends to develop, test parameter software and, for memory        
chips, a core interface specification. Test parameters are the programs that    
test the Rambus technology embedded in the customer's product. Many licensees   
have contracted to have Rambus provide the specific engineering implementation  
services required to optimize the generalized circuit layout for the            
licensee's manufacturing process. The contracts also provide for the right to   
receive ongoing customer support which includes technical advice on chip        
specifications, enhancements, debugging and testing.                            

The Company recognizes revenue consistent with Statement of Position 91-1,  
Software Revenue Recognition ("SOP"). This SOP applies to all entities that     
earn revenue on products containing software, where software is not incidental  
to the product as a whole.                                                      

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):                     

The contract fees for the services provided under these agreements are      
comprised of license fees, engineering service fees and nonrefundable, prepaid  
royalties. The contract fees are bundled together as the total price of the     
agreement does not vary as a result of inclusion or exclusion of services.      
Accordingly, the revenues from such contract fees are recognized ratably over   
the period during which the post-contract customer support is expected to be    
provided independent of the payment schedules under the contract, including     
milestones. This period represents the estimated life of the technology which   
was initially eight years and is currently five years. At the time the Company  
begins to recognize revenue under the contract, the remaining obligations, as   
defined by the SOP, are no longer significant. These remaining obligations are  
primarily to keep the product updated and include activities such as            
responding to inquiries and periodic customer meetings. Historically the        
product life has been less than the contract life, however the Company defers   
5% of the contract fees to meet any insignificant obligations arising under     
those contracts subsequent to product life. At September 30, 1995 and 1996,     
and March 31, 1997, the amounts included in deferred revenue to meet these      
obligations were $2.0 million, $2.5 million and $3.4 million, respectively.     

Part of these contract fees may be due upon the achievement of certain      
milestones, such as provision of certain deliverables by the Company or         
production of chips by the licensee. The remaining fees are due on pre-         
determined dates and include significant up-front fees.                         

The Company recognizes royalties upon notification of sale by its licensees.
The terms of the royalty agreements generally require licensees to give         
notification to the Company and to pay royalties within 60 days of the end of   
the quarter during which the sales take place.                                  

Research and Development:                                                     

Costs incurred in research and development are expensed as incurred.        
Software development costs are capitalized beginning when a product's           
technological feasibility has been established and ending when a product is     
available for general release to customers. The Company has not capitalized     
any software development costs since such costs have not been significant.      

Income Taxes:                                                                 

The Company accounts for income taxes under the liability method whereby    
deferred tax asset or liability account balances are calculated at the balance  
sheet date using current laws and rates in effect. Research and development     
credits are accounted for using the flow-through method.                        

Computation of Historical Net Income (Loss) Per Share and Pro Forma Net       
Income (Loss) Per Share:                                                        

Historical net income (loss) per share is computed using the weighted       
average number of common and dilutive common equivalent shares outstanding      
during the period. Dilutive common equivalent shares consist of the             
incremental common shares issuable upon conversion of convertible preferred     
stock (using the "if converted" method) and stock options and warrants (using   
the treasury stock method) as if converted for all periods.                     

The Company has computed common and common equivalent shares in determining 
the number of shares used in calculating net income (loss) per share for all    
periods presented pursuant to the Securities and Exchange Commission Staff      
Accounting Bulletin (SAB) No. 83. SAB 83 requires the Company to include all    
common shares and all common share equivalents issued during the 12 month       
period preceding the filing date of an initial public offering in its           
calculation of the number of shares used to determine net income (loss) per     
share as if the shares had been outstanding for all periods presented.          

Pro forma net income (loss) per share for the year ended September 30, 1996 
and the six months ended March 31, 1997 assumes the common shares issuable      
upon conversion of the outstanding convertible preferred stock have been        
outstanding during such periods.                                                

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):                     

Pro forma net income (loss) per share is as follows (in thousands, except   
per share data):                                                                

                                                                [Download Table]

                                                                (UNAUDITED)
                                                                SIX MONTHS 
                                                   YEAR ENDED      ENDED   
                                                  SEPTEMBER 30,  MARCH 31, 
                                                      1996         1997    
                                                  ------------- -----------
                                                                           
Net income (loss)................................    $(4,415)     $  388   
                                                     =======      ======   
Pro forma net income (loss) per share............    $ (0.25)     $ 0.02   
                                                     =======      ======   
Pro forma number of shares used in per share                               
 calculation.....................................     17,385      20,083   
                                                     =======      ======   

Cash and Cash Equivalents:                                                    

Cash equivalents are highly liquid investments with original or remaining   
maturities of three months or less at the date of purchase. Cash equivalents    
present risk of changes in value because of interest rate changes. The Company  
maintains its cash balances with high quality financial institutions and has    
not experienced any material losses relating to any investment instruments.     

Marketable Securities:                                                        

Available-for-sale securities are carried at fair value, based on quoted    
market prices, with the unrealized gains or losses, net of tax, reported in     
stockholders' deficit. The amortized cost of debt securities is adjusted for    
amortization of premiums and accretion of discounts to maturity, both of which  
are included in interest income. Realized gains and losses are recorded on the  
specific identification method.                                                 

Fair Value of Financial Instruments:                                          

The amounts reported for cash equivalents, receivables and other financial  
instruments are considered to approximate fair values based upon comparable     
market information available at the respective balance sheet dates.             

Property and Equipment:                                                       

Property and equipment are stated at cost and depreciated on a straight-line
basis over estimated useful lives of three to five years. Leasehold             
improvements and property under capital leases are amortized on a straight-     
line basis over the shorter of their estimated useful lives or the terms of     
the leases. Upon disposal, assets and related accumulated depreciation are      
removed from the accounts and the related gain or loss is included in results   
from operations.                                                                

Foreign Currency Translation:                                                 

The functional currency for the Company's foreign operation in Japan is the 
Japanese yen. The translation from the Japanese yen to U.S. dollars is          
performed for balance sheet accounts using current exchange rates in            

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

effect at the balance sheet date and for revenue and expense accounts using     
the weighted average exchange rate during the period. Adjustments resulting     
from such translation are reflected as a separate component of stockholders'    
deficit. Gains or losses resulting from foreign currency transactions are       
included in the results of operations.                                          

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):                     

Unaudited Interim Financial Information:                                      

The accompanying interim consolidated balance sheet as of March 31, 1997 and
the consolidated statements of operations and cash flows for the six months     
ended March 31, 1996 and 1997 together with the related notes are unaudited     
but include all adjustments, consisting of only normal recurring adjustments,   
which the Company considers necessary to present fairly, in all material        
aspects, the consolidated financial position, the results of operations and     
cash flows for the period ended March 31, 1996 and 1997. Results for the six    
months ended March 31, 1996 and 1997 are not necessarily indicative of results  
for an entire year.                                                             

New Pronouncements:                                                           

During March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and     
for Long-Lived Assets to Be Disposed Of," which requires the Company to review  
the impairment of long-lived assets, certain identifiable intangibles, and      
goodwill related to those assets whenever events or changes in circumstances    
indicate that the carrying amount of an asset may not be recoverable. SFAS 121  
will become effective for the Company's 1997 fiscal year. The Company does not  
expect SFAS 121 to have a material impact on the Company's financial condition  
or results of operations.                                                       

Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting  
for Stock-Based Compensation," encourages, but does not require, companies to   
record compensation cost for stock-based compensation plans at fair value. The  
Company has chosen to continue to account for employee stock options            
using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting  
for Stock Issued to Employees." Accordingly, compensation cost for stock        
options is measured as the excess, if any, of the quoted market price of the    
Company's stock at the date of the grant over the amount an employee must pay   
to acquire the stock. The Company will provide pro forma disclosures for the    
effect of this statement for the 1997 fiscal year.                              

3. BUSINESS RISKS AND CREDIT CONCENTRATION:                                     

The Company operates in the intensely competitive semiconductor industry    
which has been characterized by price erosion, rapid technological change,      
short product life cycles, cyclical market patterns and heightened foreign and  
domestic competition. Significant technological changes in the industry could   
affect operating results adversely.                                             

The Company markets and sells its technology to a narrow base of customers  
and generally does not require collateral. At March 31, 1997, three customers   
accounted for 48%, 16% and 14% of accounts receivable, respectively. At         
September 30, 1996, three customers accounted for 59%, 21% and 17% of accounts  
receivable. At September 30, 1995, three customers accounted for 42%, 41% and   
17% of accounts receivable.                                                     

As of March 31, 1996 and 1997, the Company's cash and cash equivalents are  
deposited with principally one financial institution in the form of demand      
deposits and money market accounts.                                             

Financial instruments that potentially subject the Company to concentrations
of credit risk comprise principally cash and cash equivalents, available-for-   
sale securities and trade accounts receivable. The Company invests its excess   
cash primarily in commercial paper, U.S. government agency and treasury notes   
that mature within one year.                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

4. MARKETABLE SECURITIES:                                                       

All marketable securities are classified as available-for-sale and are      
summarized as follows (in thousands):                                           

                                                                [Download Table]

                                               SEPTEMBER 30,             
                                               --------------  MARCH 31, 
                                                1995    1996     1997    
                                               ------- ------ -----------
                                                              (UNAUDITED)
                                                                         
United States government debt securities...... $ 4,344 $2,442   $   --   
U.S. treasury bills...........................   3,366     --       --   
Commercial paper..............................   5,463  5,370    9,282   
                                               ------- ------   ------   
                                               $13,173 $7,812   $9,282   
                                               ======= ======   ======   

All marketable securities classified as current have scheduled maturities of
less than one year. At September 30, 1995 and 1996, and March 31, 1997, the     
cost of marketable securities represents the fair value of the securities, and  
there are no unrealized holding gains or losses.                                

5. PROPERTY AND EQUIPMENT:                                                      

Property and equipment, net is comprised of the following (in thousands):   

                                                                [Download Table]

                                             SEPTEMBER 30,               
                                            ----------------   MARCH 31, 
                                             1995     1996       1997    
                                            -------  -------  -----------
                                                              (UNAUDITED)
                                                                         
Computer equipment......................... $ 2,962  $ 3,684    $ 4,609  
Computer software..........................   1,977    2,771      3,357  
Furniture and fixtures.....................     546      818        858  
Leasehold improvements.....................     170      272        274  
                                            -------  -------    -------  
                                              5,655    7,545      9,098  
Less accumulated depreciation and                                        
 amortization..............................  (4,057)  (5,205)    (5,954) 
                                            -------  -------    -------  
                                            $ 1,598  $ 2,340    $ 3,144  
                                            =======  =======    =======  

Depreciation and amortization expense was approximately $1,295,000,         
$1,288,000, $1,148,000, $570,000 and $749,000 in the years ended September 30,  
1994, 1995 and 1996 and the six months ended March 31, 1996 and 1997,           
respectively.                                                                   

Property and equipment acquired under capital leases included above is      
comprised of (in thousands):                                                    

                                                                [Download Table]

                                               SEPTEMBER 30,               
                                              ----------------   MARCH 31, 
                                               1995     1996       1997    
                                              -------  -------  -----------
                                                                (UNAUDITED)
                                                                           
Computer equipment........................... $ 2,514  $ 2,302    $ 1,640  
Furniture and fixtures.......................     460      403        355  
                                              -------  -------    -------  
                                                2,974    2,705      1,995  
Less accumulated amortization................  (2,164)  (1,989)    (1,511) 
                                              -------  -------    -------  
                                              $   810  $   716    $   484  
                                              =======  =======    =======  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

6. INVESTMENT:                                                                  

In December 1996, the Company licensed technology to Monolithic System      
Technology, Inc. (MoSys) in exchange for a cash payment of $50,000 and 184,617  
shares of MoSys common stock valued at $1,200,000, based on the latest round    
of equity financing. These shares represented a 1% equity interest in MoSys at  
the time of issuance. The license fee of $1,250,000 was initially recorded as   
deferred revenue and is being recognized as revenue in accordance with the      
Company's revenue recognition policy.                                           

7. ACCOUNTS AND TAXES PAYABLE, ACCRUED PAYROLL AND OTHER LIABILITIES:           

Accounts and taxes payable, accrued payroll and other liabilities consist of
the following (in thousands):                                                   

                                                                [Download Table]

                                                  SEPTEMBER 30,            
                                                  -------------  MARCH 31, 
                                                   1995   1996     1997    
                                                  ------ ------ -----------
                                                                (UNAUDITED)
                                                                           
Accounts payable................................. $  110 $  228   $  382   
Taxes payable....................................     82     84      334   
Accrued payroll and related accruals.............    231    338      608   
Other liabilities................................    690    587      520   
                                                  ------ ------   ------   
                                                  $1,113 $1,237   $1,844   
                                                  ====== ======   ======   

8. CAPITAL LEASE OBLIGATIONS:                                                   

The Company has leased equipment under capital lease obligations maturing   
through fiscal year 1999. The lease agreements require the Company to maintain  
liability and property insurance.                                               

At September 30, 1996, future minimum annual payments due under the capital 
lease obligations are as follows (in thousands):                                

                                                                [Download Table]

FISCAL YEAR:                                                            
------------                                                            
                                                                        
1997............................................................ $  913 
1998............................................................    458 
1999............................................................    153 
                                                                 ------ 
Minimum lease payments..........................................  1,524 
Less amount representing interest...............................   (227)
                                                                 ------ 
Total minimum payments..........................................  1,297 
Less amount due in one year.....................................   (753)
                                                                 ------ 
Long term amount due after one year............................. $  544 
                                                                 ====== 

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

9. LEASE COMMITMENTS AND COMMITMENTS TO THE COMPANY'S FOUNDERS:                 

The Company leases its office facilities under an operating lease agreement 
that expires February 28, 2005. Under the terms of this lease, the Company is   
also responsible for taxes, insurance and utilities. As of September 30, 1996,  
aggregate future minimum payments under this lease are (in thousands):          

                                                                [Download Table]

FISCAL YEAR:                                                           
------------                                                           
                                                                       
1997............................................................ $  645
1998............................................................    660
1999............................................................    682
2000............................................................    698
2001............................................................    720
Thereafter......................................................  2,589
                                                                 ------
Total minimum lease payments.................................... $5,994
                                                                 ======

Rent expense was approximately $320,000, $581,000, $736,000, $369,000 and   
$394,000 for the years ended September 30, 1994, 1995 and 1996 and for the six  
months ended March 31, 1996 and 1997, respectively.                             

Rambus Partners                                                               

Under an agreement signed in March 1990, the Company secured certain patent 
rights and technology from its founders. The Company committed, under this      
agreement, to pay to the founders up to a total of 24% of amounts received      
from any licensing of the patent rights and technology to third parties.        
Subsequently, the founders assigned their rights to receive payments to Rambus  
Partners, an entity wholly owned by the founders. In September 1992, the        
Company acquired Rambus Partners in exchange for 978,260 shares of the          
Company's common stock. In addition the Company assumed option obligations for  
a total of 146,739 shares of the Company's common stock. The Company accounted  
for this acquisition as a purchase transaction. The purchase price was          
$431,000.                                                                       

In September 1992, the Company also entered into agreements to pay certain  
cash amounts to the founders. The total amounts paid to the founders under      
these agreements were approximately $244,000 in each of the fiscal years 1994,  
1995 and 1996. Included in the accompanying balance sheets under the caption    
other current liabilities are amounts payable to the founders of approximately  
$463,000 at September 30, 1995, $244,000 at September 30, 1996 and none at      
March 31, 1997. The associated deferred amounts to the founders totaling        
$679,000, $456,000 and $344,000 at September 30, 1995 and 1996 and March 31,    
1997, respectively, include $223,000 classified in other current assets for     
each period with the remaining balance classified in other assets.              

10. STOCKHOLDERS' DEFICIT:                                                      

Convertible Preferred Stock:                                                  

Holders of Series A, B, C and D preferred stock are entitled to preferential
noncumulative dividends generally at a rate not to exceed $0.032, $0.1712,      
$0.24 and $0.34 per share, respectively, if and when declared by the Board of   
Directors. No dividends have been declared as of September 30, 1996. The        
holders of Series A, B, C and D shares have liquidation preferences of $0.40,   
$2.14, $3.00 and $4.25 per share, respectively, plus an amount equal to all     
declared but unpaid dividends. Preferred stockholders are entitled to one vote  
for each share of common stock into which the preferred stock is convertible.   
Additionally, preferred stockholders are entitled to elect two directors.       

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

10. STOCKHOLDERS' DEFICIT--(CONTINUED):                                         

At the option of the holder, each share of preferred stock is convertible on
a one-for-one basis (subject to certain adjustments) into common stock. The     
shares will automatically convert into common stock concurrent with the         
closing of an underwritten public offering of common stock under the            
Securities Act of 1933, as amended, with minimum proceeds of $7,500,000 and a   
minimum price per share of $4.25 (subject to certain adjustments).              

In 1990, the Company entered into an agreement with Intel Corporation, under
which it issued shares of Series A Preferred Stock to Intel. The shares issued  
were subject to Rambus' assignable right to repurchase the shares, under        
certain circumstances, at the original price paid by Intel. In 1995, this       
right of repurchase was sold by the Company to entities affiliated with         
Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard,   
Anderson & Eyre, Integral Capital Partners and Dominion Income Management       
Corp. for an aggregate of $936,012. These entities then exercised the right     
and purchased the Rambus Series A Preferred Stock from Intel. The proceeds to   
the Company are included in additional paid-in capital in the accompanying      
balance sheet.                                                                  

At September 30, 1996 and March 31, 1997, convertible preferred stock       
consists of the following (in thousands):                                       

                                                                [Download Table]

                                                      COMMON              
                                                      STOCK               
                                 SHARES              RESERVED             
                      SHARES   ISSUED AND  PROCEEDS    FOR     LIQUIDATION
SERIES              AUTHORIZED OUTSTANDING  (NET)   CONVERSION    VALUE   
------              ---------- ----------- -------- ---------- -----------
                                                                          
A..................    5,400      5,361    $ 3,678     5,361     $ 2,144  
B .................    2,804      2,804      5,977     2,804       6,000  
C .................    1,250      1,250      3,743     1,250       3,750  
D..................    1,882      1,882      7,965     1,882       8,000  
                      ------     ------    -------    ------     -------  
                      11,336     11,297    $21,363    11,297     $19,894  
                      ======     ======    =======    ======     =======  

Common Stock:                                                                 

Founders of the Company received an aggregate of 2,182,653 shares of common 
stock upon incorporation of the Company in exchange for the assignment of       
patent rights and technology. These shares were subject to the Company's right  
of repurchase under a Stock Restriction Agreement. During fiscal 1994, the      
Company amended the Stock Restriction Agreement. In accordance with the         
amendment, the Company repurchased 165,000 shares of its common stock at $0.04  
per share and the Company's right of repurchase with respect to the remaining   
shares expired. During fiscal 1995, the Company repurchased an additional       
88,000 shares of common stock from founders at a price of $0.04 per share.      

As of September 30, 1996, a total of 261,283 common shares held by employees
were subject to repurchase.                                                     

In September 1996, the Company's Board of Directors, subject to stockholder 
approval, increased the number of authorized shares of common stock to          
22,500,000.                                                                     

Stock Option Plan:                                                            

In March 1990, the Company adopted the 1990 Stock Option Plan under which   
2,657,143 shares of common stock were reserved for issuance. Incentive stock    
options may be granted with exercise prices of no less than fair market value,  
and nonqualified stock options may be granted with exercise prices of no less   
than 85% of the fair market value of the common stock on the grant date, as     
determined by the Board of Directors. Grants to employees of the Company who    
are also directors of the Company may not exceed 800,000 shares of common       

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

10. STOCKHOLDERS' DEFICIT--(CONTINUED):                                         

stock. The options generally vest over a four-year period but may be exercised  
immediately subject to repurchase by the Company for those options that are     
not vested. Vesting periods are determined by the Board of Directors at the     
date of grant.                                                                  

During 1992 and 1994, the 1990 Stock Option Plan was amended to authorize   
the granting of options which shall vest within one year from the date that     
certain options previously granted to the optionee (as defined in the Plan)     
have vested in full. Pursuant to requirements imposed by the California         
Department of Corporations, these options may be granted only to those          
employees whose annual compensation exceeds $60,000 per year. The total number  
of shares reserved for these options is 950,000.                                

At September 30, 1996 and March 31, 1997, the total number of shares        
reserved for the 1990 Stock Option Plan, excluding those previously exercised   
under the Plan, is 4,170,902 and 2,522,822, respectively.                       

A summary of options granted under the plan is as follows:                  

                                                                [Download Table]

                                                        OPTIONS OUTSTANDING   
                                             SHARES    -----------------------
                                           AVAILABLE   NUMBER OF      PRICE   
                                           FOR GRANT     SHARES     PER SHARE 
                                           ----------  ----------  -----------
                                                                              
Outstanding at September 30, 1993.........    665,807   2,606,689  $0.04-$0.25
Shares reserved...........................    967,857         --           -- 
Options granted........................... (1,063,700)  1,063,700  $0.25-$1.00
Options canceled..........................     64,637     (64,637)    $0.25   
Options exercised.........................        --   (1,247,995) $0.04-$0.40
                                           ----------  ----------             
Outstanding at September 30, 1994.........    634,601   2,357,757  $0.04-$1.00
Shares reserved...........................    875,000         --           -- 
Options granted........................... (1,204,900)  1,204,900  $1.00-$3.00
Options canceled..........................     37,513     (37,513) $0.25-$1.00
Options exercised.........................        --     (498,789) $0.13-$1.00
                                           ----------  ----------             
Outstanding at September 30, 1995.........    342,214   3,026,355  $0.04-$3.00
Shares reserved...........................  1,000,000         --           -- 
Options granted...........................   (347,500)    347,500  $3.00-$5.00
Options canceled..........................     70,738     (70,738) $0.25-$3.00
Options exercised.........................        --     (197,667) $0.04-$4.00
                                           ----------  ----------             
Outstanding at September 30, 1996.........  1,065,452   3,105,450  $0.04-$5.00
Options granted...........................   (717,100)    717,100  $5.00-$8.00
Options exercised.........................        --   (1,648,080) $0.04-$7.00
                                           ----------  ----------             
Outstanding at March 31, 1997                                                 
 (unaudited)..............................    348,352   2,174,470  $0.13-$8.00
                                           ==========  ==========             

At September 30, 1996 and March 31, 1997, options for the purchase of       
1,385,519 and 548,783 shares, respectively, were exercisable without            
repurchase from the Company.                                                    

11. EMPLOYEE BENEFIT PLANS:                                                     

The Company has a 401(k) Profit Sharing Plan (the "Plan") qualified under   
Section 401(k) of the Internal Revenue Code of 1986. Each eligible employee     
may elect to contribute up to 20% of the employee's annual compensation to the  
Plan. The Company, at the discretion of its Board of Directors, may match       
employee contributions to the Plan but has not done so for the years ended      
September 30, 1994, 1995 and 1996.                                              

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

12. INCOME TAXES:                                                               

The provision for income taxes comprises (in thousands):                    

                                                                [Download Table]

                                                  YEAR ENDED SEPTEMBER 30,  
                                                  --------------------------
                                                   1994     1995     1996   
                                                  ----------------- --------
                                                                            
Foreign withholding tax:                                                    
  Current........................................ $   350 $   1,235 $   270 
Federal:                                                                    
  Current........................................     --         40     --  
State:                                                                      
  Current........................................       1        14      16 
                                                  ------- --------- ------- 
                                                  $   351 $   1,289 $   286 
                                                  ======= ========= ======= 

The Company's effective tax rate on pretax income differs from the U.S.     
federal statutory regular tax rate as follows:                                  

                                                                [Download Table]

                           YEAR ENDED SEPTEMBER 30,       
                          ------------------------------  
                            1994       1995       1996    
                          --------   --------   --------  
                                                          
Benefit at U.S. federal                                   
 statutory rate.........     (34.0)%    (34.0)%    (34.0)%
Tax losses not currently                                  
 benefited..............      34.0       34.0       34.0  
Foreign withholding                                       
 tax....................       5.6       21.6        6.5  
Other...................        --        0.9        0.4  
                          --------   --------   --------  
                               5.6%      22.5%       6.9% 
                          ========   ========   ========  

At September 30, 1996, the Company has the following tax carryforwards which
expire as follows (in thousands):                                               

                                                                [Download Table]

                                    FEDERAL  EXPIRES  CALIFORNIA  EXPIRES 
                                    ------- --------- ---------- ---------
                                                                          
Net operating loss................. $8,900  2008-2009   $3,500   1998-2000
Foreign tax credits................  2,440  1997-2001       --          --
Research and development credits...    562    2010         306     2010   

The utilization of the Company's tax carryforwards may be subject to certain
limitations in the case of an ownership change of the Company, as defined by    
the tax laws.                                                                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

12. INCOME TAXES--(CONTINUED):                                                  

The components of the net deferred tax assets are as follows (in thousands):

                                                                [Download Table]

                                                          SEPTEMBER 30,    
                                                        ------------------ 
                                                          1995      1996   
                                                        --------  -------- 
                                                                           
Deferred tax assets:                                                       
  Deferred revenue..................................... $  8,909  $  9,206 
  Deferred compensation................................      185        98 
  Depreciation and amortization expense................      345       174 
  Other liabilities and reserves.......................      590       220 
  Foreign tax credits..................................    2,531     2,440 
  Research and development credits.....................      840       868 
  Net operating loss...................................    1,500     3,361 
                                                        --------  -------- 
    Total deferred tax asset...........................   14,900    16,367 
Deferred tax liability:                                                    
  Deferred royalty cost................................     (474)     (296)
Valuation allowance....................................  (14,426)  (16,071)
                                                        --------  -------- 
    Net deferred tax asset............................. $     --  $     -- 
                                                        ========  ======== 

The Company has established a full valuation allowance against its deferred 
tax assets due to the uncertainty surrounding the realization of such assets.   
Management periodically evaluates the recoverability of the deferred tax        
assets and recognizes the tax benefit only as reassessment demonstrates they    
are realizable. At such time, if it is determined that it is more likely than   
not that the deferred tax assets are realizable, the valuation allowance will   
be reduced.                                                                     

13. RELATED PARTY TRANSACTIONS:                                                 

Chromatic Research Inc. In February 1994, the Company licensed its interface
technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor     
design company. Under the terms of the license, Rambus received 626,053 shares  
of Chromatic Series B Preferred Stock (representing 5% of the then outstanding  
shares of Chromatic) and continuing royalties. Chromatic was formed in May      
1993 (then called Xenon Microsystems Corporation) by, among others, Dr.         
Farmwald who continues to serve as a director of, and consultant to, Chromatic  
through the date hereof. Investors in Chromatic include affiliates of Mohr,     
Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins,       
Caufield & Byers. In connection with these investments in Chromatic, Dr.        
Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors   
of Chromatic. The initial valuation of the Chromatic stock, approximately       
$626,000, has been fully written down by the Company. Revenue recognized as     
license fees under this agreement was $69,000, $119,000 and $119,000 in the     
years ended September 30, 1994, 1995 and 1996, respectively, and $59,000 for    
the six months ended March 31, 1997. As of September 30, 1996 and March 31,     
1997, the remaining balance of approximately $319,000 and $259,000,             
respectively, is included in deferred revenue.                                  

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

14. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:                             

The Company operates in a single industry segment.                          

Six customers accounted for 16%, 12%, 15%, 12%, 14% and 13% of revenues in  
the year ended September 30, 1995 and six customers accounted for 14%, 15%,     
11%, 11%, 13% and 12% of revenues in the year ended September 30, 1996. Four    
customers accounted for 12%, 16%, 10% and 38% of revenues in the year ended     
September 30, 1994. Six customers accounted for 13%, 12%, 14%, 11%, 13% and     
20% of revenues and two customers accounted for 11% and 32% of revenues for     
the six months ended March 31, 1996 and 1997, respectively.                     

The Company sells its technology to customers in the Far East and North     
America. The net income and loss for all periods presented are derived          
primarily from the Company's North American operations, which generates sales   
to the following geographic region (in thousands):                              

                                                                [Download Table]

                                                           SIX MONTHS ENDED
                                  YEAR ENDED SEPTEMBER 31,    MARCH 31,    
                                  ------------------------ ----------------
                                   1994    1995     1996    1996     1997  
                                  ------------------------ ----------------
                                                             (UNAUDITED)   
                                                                           
Far East......................... $ 4,499 $ 6,619 $  9,692 $ 4,562 $  9,509
North America....................     501     745    1,578     510    1,916
                                  ------- ------- -------- ------- --------
                                  $ 5,000 $ 7,364 $ 11,270 $ 5,072 $ 11,425
                                  ======= ======= ======== ======= ========

15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                           

Cash paid during the periods for taxes and interest are indicated below (in 
thousands):                                                                     

                                                                [Download Table]

                                                          SIX MONTHS ENDED 
                                YEAR ENDED SEPTEMBER 30,      MARCH 31,    
                                -------------------------------------------
                                 1994     1995     1996     1996     1997  
                                ----------------- ---------------- --------
                                                             (UNAUDITED)   
                                                                           
Taxes..........................    $351 $   1,266    $286     $183     $529
Interest.......................    $296 $     297    $298     $155     $137

Supplemental schedule of noncash investing and financing activities:          

The Company had no material noncash investing or financing activities in the
year ended September 30, 1996. Noncash investing and financing activities are   
as follows (in thousands):                                                      

                                                                [Download Table]

                                                   YEAR ENDED    SIX MONTHS 
                                                  SEPTEMBER 30,     ENDED   
                                                  -------------   MARCH 31, 
                                                   1994   1995      1997    
                                                  -------------  -----------
                                                                 (UNAUDITED)
                                                                            
Acquisition of property equipment under capital                             
 lease obligations............................... $   158   $39        --   
License of technology in exchange for common                                
 stock........................................... $   626    --    $1,200   
Issuance of stockholders' notes receivable....... $    --    --    $  733   

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

16. PRO FORMA:                                                                  

Upon the closing of an initial public offering of the Company's common stock
that meets the criteria set out in Note 10, all the convertible preferred       
stock outstanding will convert into an aggregate of 11,296,822 shares of        
common stock. At March 31, 1997, the unaudited pro forma stockholders' deficit  
is adjusted for the conversion of the convertible preferred stock outstanding   
at March 31, 1997 and is disclosed on the face of the consolidated balance      
sheets.                                                                         

17. SUBSEQUENT EVENTS:                                                          

On October 16, 1996, the Company entered into a loan and security agreement 
with Silicon Valley Bank to borrow up to $1,000,000 to finance equipment and    
tenant improvements. This agreement was canceled by the Company in March 1997.  

In November 1996, the Company entered into an agreement with Intel          
Corporation for the development of high speed semiconductor memory interface    
technology. As part of this agreement, the Company issued a warrant on January  
7, 1997 to purchase 1,000,000 shares of common stock of the Company at a        
purchase price of $10.00 per share. This warrant will become exercisable only   
upon the achievement of certain specified performance milestones, resulting in  
a charge to the statement of operations at the time of achievement of these     
milestones based on the fair value of the warrant.                              

The reincorporation of the Company in Delaware occurred in March 1997. Under
the new Certificate of Incorporation in Delaware, the Company is authorized to  
issue 60,000,000 shares of common stock and 16,336,096 shares of preferred      
stock at $0.001 par value.                                                      

On February 28, 1997, the Board of Directors authorized management of the   
Company to file a Registration Statement with the Securities and Exchange       
Commission relating to a public offering of the Company's Common Stock. The     
Board also approved the termination of the 1990 Stock Plan upon the completion  
of the initial public offering, the adoption of a 1997 Employee Stock Purchase  
Plan, and the adoption of a 1997 Stock Plan (see description below).            
Additionally, the Board approved certain amendments to the Company's            
Certificate of Incorporation and Bylaws (including the establishment of a       
classified Board). The Board approved the creation of new Compensation          
Committee, an Audit Committee and a Stock Option Committee. Finally, the Board  
approved the establishment of a Stockholder Rights Plan pursuant to which each  
holder of the Company's common stock shall receive a right to purchase one-     
thousandth of a share of Series E Preferred Stock for $125 per right, subject   
to a number of conditions. Such rights are subject to adjustment in the event   
of a takeover or commencement of a tender offer not approved by the Board of    
Directors.                                                                      

The 1997 Employee Stock Purchase Plan authorizes the granting of stock      
purchase rights to eligible employees during two-year offering periods with     
exercise dates approximately every six months. The Company has reserved         
400,000 shares of common stock for issuance under the plan. The first offering  
period for the plan will commence on the effective date of this offering and    
will end on the last trading day in the period ending April 30, 1999. Shares    
are purchased through employees' payroll deductions at purchase prices equal    
to 85% of the lesser of the fair market value of the Company's common stock at  
either the first day of each offering period or the date of purchase.           

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RAMBUS INC. AND SUBSIDIARY  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

17. SUBSEQUENT EVENTS--(CONTINUED) :                                            

The 1997 Stock Plan authorizes the issuance of incentive stock options and  
nonstatutory stock options to employees and nonstatutory stock options to       
directors, employees or paid consultants of the Company. The Company has        
reserved 1,000,000 shares of common stock for issuance under the plan. The      
plan expires ten years after adoption, and the Board of Directors or a          
committee designated by the Board of Directors has the authority to determine   
to whom options will be granted, the number of shares, the vesting period and   
the exercise price (which generally cannot be less than 100% of the fair        
market value at the date of grant for incentive stock options). The options     
are exercisable at times and in increments as specified by the Board of         
Directors, and expire not more than ten years from date of grant.               

In February and March 1997, the Company issued loans to certain key         
personnel in connection with the exercise of options to purchase shares of the  
Company's common stock. The loans bear interest at an annual rate of 12.0%,     
are evidenced by promissory notes, and are secured by a pledge of the           
underlying shares of common stock. Principal and accrued interest on the loans  
are due in September 1998. The aggregate principal balance outstanding at       
March 31, 1997 is approximately $733,000.                                       

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[LOGO OF RAMBUS]        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B4’ Filing		Date		First		Last			Other Filings
		3/21/07		63					8-K
		2/28/05		83					8-K
		1/7/05		56
		12/31/00		56					10-Q
		10/1/99		50
		4/30/99		53		89			10-Q
		6/7/97		2
		5/19/97		1
Filed on:		5/14/97
		5/13/97		1					S-1/A
		4/9/97		58		59
		4/1/97		63
		3/31/97		5		90
		2/28/97		62		89
		1/7/97		89					8-K
		12/31/96		8		44
		11/13/96		50
		11/1/96		72
		10/16/96		89
		9/30/96		5		88
		3/31/96		20		88
		12/4/95		50
		9/30/95		20		88
		2/24/95		54
		9/30/94		20		88
		12/23/93		54
		9/30/93		20		85
		9/30/92		20
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