The following discussion contains forward-looking statements, including, without limitation, our expectations regarding revenues, expenses and results of operations. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are not limited to, those discussed in the "Special Note Regarding Forward-Looking Statements," Part II, Item 1A, "Risk Factors," and below. We assume no obligation to update the forward-looking statements or such risk factors.

Rambus, RDRAM, XDR, FlexIO and FlexPhase are trademarks or registered trademarks of Rambus Inc. Other trademarks that may be mentioned in this quarterly report on Form 10-Q are the property of their respective owners.

Industry terminology, used widely throughout this quarterly report, has been abbreviated and, as such, these abbreviations are defined below for your convenience:

                Advanced Backplane                         ABP
                Double Data Rate                           DDR
                Dynamic Random Access Memory               DRAM
                Fully Buffered-Dual Inline Memory Module   FB-DIMM
                Gigabytes per second                       Gb/s
                Graphics Double Data Rate                  GDDR
                Input/Output                               I/O
                Peripheral Component Interconnect          PCI
                Rambus Dynamic Random Access Memory        RDRAM
                Single Data Rate                           SDR
                Synchronous Dynamic Random Access Memory   SDRAM
                eXtreme Data Rate                          XDR

From time to time we will refer to the abbreviated names of certain companies and, as such, have provided a chart to indicate the full names of those companies for your convenience.

  Advanced Micro Devices Inc.                                  AMD
  ARM Holdings plc                                             ARM
  Cadence Design Systems, Inc.                                 Cadence
  Cisco Systems, Inc.                                          Cisco
  Elpida Memory, Inc.                                          Elpida
  Fujitsu Limited                                              Fujitsu
  GDA Technologies, Inc.                                       GDA
  Hewlett-Packard Company                                      Hewlett-Packard
  Hynix Semiconductor, Inc.                                    Hynix
  Infineon Technologies AG                                     Infineon
  Inotera Memories, Inc.                                       Inotera
  Intel Corporation                                            Intel
  International Business Machines Corporation                  IBM
  Joint Electron Device Engineering Council                    JEDEC
  Juniper Networks, Inc.                                       Juniper
  Matsushita Electrical Industrial Co.                         Matsushita
  Micron Technologies, Inc.                                    Micron
  Nanya Technology Corporation                                 Nanya
  NEC Electronics Corporation                                  NECEL
  Optical Internetworking Forum                                OIF
  Qimonda AG (formerly Infineon's DRAM operations)             Qimonda
  Peripheral Component Interconnect - Special Interest Group   PCI-SIG
  Renesas Technology Corporation                               Renesas
  S3 Graphics, Inc.                                            S3 Graphics
  Samsung Electronics Co., Ltd.                                Samsung
  Sony Computer Electronics                                    Sony
  Spansion, Inc.                                               Spansion
  ST Microelectronics                                          ST Micro
  Synopsys Inc.                                                Synopsys
  Tessera Technologies, Inc.                                   Tessera
  Texas Instruments Inc.                                       Texas Instruments
  Toshiba Corporation                                          Toshiba
  Velio Communications                                         Velio

Business Overview

We design, develop and license chip interface technologies and architectures that are foundational to nearly all digital electronics products. Our chip interface technologies are designed to improve the time-to-market, performance and cost-effectiveness of our customers' semiconductor and system products for computing, communications and consumer electronics applications.

As of September 30, 2007, our chip interface technologies are covered by more than 650 U.S. and international patents. Additionally, we have approximately 500 patent applications currently pending. These patents and patent applications cover important inventions in memory and logic chip interfaces, in addition to other technologies. We believe that our chip interface technologies provide a higher performance, lower risk, and more cost-effective alternative for our customers than can be achieved through their own internal research and development efforts.

We offer our customers two alternatives for using our chip interface technologies in their products:

First, we license our broad portfolio of patented inventions to semiconductor and system companies who use these inventions in the development and manufacture of their own products. Such licensing agreements may cover the license of part, or all, of our patent portfolio. Patent license agreements are royalty bearing.

Second, we develop "leadership" (which are Rambus-proprietary products widely licensed to our customers) and industry-standard chip interface products that we provide to our customers under license for incorporation into their semiconductor and system products. Because of the often complex nature of implementing state-of-the art chip interface technology, we offer our customers a range of engineering services to help them successfully integrate our chip interface products into their semiconductors and systems. Product license agreements may have both a fixed price (non-recurring) component and ongoing royalties. Engineering services are customarily bundled with our product licenses, and are generally performed on a fixed price basis. Further, under product licenses, our customers may receive licenses to our patents necessary to implement the chip interface in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts.

We derive the majority of our annual revenues by licensing our broad portfolio of patents for chip interfaces to our customers. Such licenses may cover part or all of our patent portfolio. Leading semiconductor and system companies such as AMD, Elpida, Fujitsu, Qimonda, Intel, Matsushita, NECEL, Renesas, Spansion and Toshiba have licensed our patents for use in their own products.

We derive additional revenues by licensing our leadership and industry-standard chip interface products to our customers for use in their semiconductor and system products. Our customers include leading companies such as Elpida, Fujitsu, IBM, Intel, Matsushita, Texas Instruments, Sony, ST Micro, Qimonda and Toshiba. Due to the complex nature of implementing our technologies, we provide engineering services under certain of these licenses to help successfully integrate our chip interface products into their semiconductors and systems. Additionally, product licensees may receive, as an adjunct to their chip interface license agreements, patent licenses as necessary to implement the chip interface in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts.

Royalties represent a substantial portion of our total revenues. The remaining part of our revenue is engineering services revenue which includes license fees and engineering services fees. The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenues or unbilled receivables in any given period.

We have a high degree of revenue concentration, with our top five licensees representing 68% of our revenues for the three and nine months ended September 30, 2007. This compares with the three and nine months ended September 30, 2006, in which revenues from our top five licensees accounted for approximately 75% and 65% of our revenues, respectively. For the three months ended September 30, 2007, revenues from Qimonda, Fujitsu, Elpida and Toshiba each accounted for 10% or more of our total revenues. For the nine months ended September 30, 2007, revenues from Fujitsu, Qimonda and Elpida each accounted for 10% or more of our total revenues. For the three months ended September 30, 2006, revenues from Fujitsu, Elpida, Qimonda and AMD each accounted for 10% or more of our total revenues.

Our revenue from companies headquartered outside of the United States accounted for 84% and 85% of our total revenues for the three and nine months ended September 30, 2007, respectively, as compared to 87% and 72% for the three and nine months ended September 30, 2006, respectively. We expect that we may continue to experience significant revenue concentration and have significant revenues from sources outside the United States for the foreseeable future.

Historically, we have been involved in significant litigation stemming from the unlicensed use of our inventions. Our litigation expenses have been high and difficult to predict and we anticipate future litigation expenses to continue to be significant, volatile and difficult to predict. If we are successful in the litigation and/or related licensing, our revenue could be substantially higher in the future; if we are unsuccessful, our revenue would likely decline.

We expect that revenues derived from international licensees will continue to represent a significant portion of our total revenues in the future. To date, all of the revenues from international licensees have been denominated in U.S. dollars. However, to the extent that such licensees' sales to systems companies are not denominated in U.S. dollars, any royalties that we receive as a result of such sales could be subject to fluctuations in currency exchange rates. In addition, if the effective price of licensed semiconductors sold by our foreign licensees were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed semiconductors could fall, which in turn would reduce our royalties. We do not use financial instruments to hedge foreign exchange rate risk.

Results of Operations

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



                                                         Three Months             Nine Months
                                                             Ended                   Ended
                                                         September 30,           September 30,
                                                       2007        2006         2007       2006
Revenues:
Contract revenues                                       15.3 %       9.6 %       15.2 %     12.5 %
Royalties                                               84.7        90.4         84.8       87.5

Total revenues                                         100.0       100.0        100.0      100.0

Costs and expenses:
Cost of contract revenues *                             13.9        13.3         13.5       16.1
Research and development *                              43.9        38.5         43.3       36.1
Marketing, general and administrative *                 71.7        52.5         57.1       57.4
Costs of restatement and related legal activities       10.0        51.8         13.4       18.0

Total costs and expenses                               139.5       156.1        127.3      127.6

Operating loss                                         (39.5 )     (56.1 )      (27.3 )    (27.6 )
Interest and other income, net                          13.5         9.7         11.8        8.4

Loss before income taxes                               (26.0 )     (46.4 )      (15.5 )    (19.2 )
Provision for (benefit from) income taxes              (10.4 )       2.9         (6.1 )     (8.1 )

Net loss                                               (15.6 )%    (49.3 )%      (9.4 )    (11.1 )%

* Includes stock-based compensation:

Cost of contract revenues                                3.2 %       4.0 %        2.9 %      4.4 %
Research and development                                 7.6         9.3          7.0        8.0
Marketing, general and administrative                    9.9         9.5         10.4        9.1

Total stock-based compensation                          20.7 %      22.8 %       20.3 %     21.5 %

The following table presents total revenues for contract revenues and royalties:

                                       Three Months Ended                                              Nine Months Ended
                                         September 30,           Variance in       Variance in           September 30,         Variance in       Variance in
(Dollars in millions)                  2007          2006          Dollars           Percent            2007        2006         Dollars           Percent
Total Revenues
Contract revenues                   $      6.4    $      4.4    $         2.0             45.5 %     $     21.1    $  17.8    $         3.3             18.5 %
Royalties                                 35.3          41.5             (6.2 )          (14.9 %)         118.3      124.9             (6.6 )           (5.3 %)

Total revenues                      $     41.7    $     45.9    $        (4.2 )           (9.2 %)    $    139.4    $ 142.7    $        (3.3 )           (2.3 %)

Contract Revenue

Percentage-of-Completion Contracts

Percentage of completion contract revenue increased approximately $0.6 million and $2.6 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006. The increase in percentage of completion contract revenue for the three and nine months ended September 30, 2007 as compared to the same periods in 2006 was due to increased revenue from leadership and industry standard chip interface contracts. We believe that percentage-of-completion contract revenues recognized will continue to fluctuate over time based on our ongoing contractual requirements, the amount of work performed, and by changes to work required, as well as new contracts booked in the future.

Other Contracts

Other contracts revenue increased approximately $1.4 million and $0.7 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006 primarily due to increased revenue from leadership contracts. We believe that other contracts revenue will continue to fluctuate over time based on our ongoing contract requirements, the timing of completing engineering deliverables, as well as new contracts booked in the future.

Royalty Revenues

Patent Licenses

In the three and nine months ended September 30, 2007, our largest source of royalties was related to the license of our patents for SDR and DDR-compatible products. Royalties decreased approximately $6.9 million for SDR and DDR-compatible products in the three months ended September 30, 2007, as compared to the same period in 2006, primarily due to decreased revenue in the third quarter of 2007 from Fujitsu. Royalties increased approximately $7.4 million in the nine months ended September 30, 2007 as compared to the same period in 2006 primarily due to overall increased revenues from Fujitsu in the nine months ended September 30, 2007.

As of September 30, 2007, we had both variable and fixed royalty agreements for our SDR and DDR-compatible licenses. On December 31, 2005, we entered into a five-year patent license agreement with AMD. We are recognizing royalty revenues under the AMD agreement on a quarterly basis as amounts become due and payable because the contractual terms of the agreement provide for payments on an extended term basis. We expect to recognize royalty revenues of $15.0 million in fiscal years 2007 through 2009 and $11.3 million in the fiscal year 2010 under the AMD agreement. The AMD agreement provides a license of our patented technology used in the design of DDR2, DDR3, FB-DIMM, PCI Express and XDR controllers as well as other current and future high-speed memory and logic controller interfaces.

On March 16, 2006, we entered into a five-year patent license agreement with Fujitsu. We expect to recognize royalty revenues under the Fujitsu agreement on a quarterly basis as amounts become due and payable as the contractual terms of the agreement provide for payments on an extended term basis. The Fujitsu agreement provides a license that covers semiconductors, components and systems, but does not include a license to Fujitsu for its own manufacturing of commodity SDRAM other than limited amounts of SDR SDRAM annually.

We are in negotiations with new prospective licensees. We expect SDR and DDR-compatible royalties will continue to vary from period to period based on our success in renewing existing license agreements and adding new licensees, as well as the level of variation in our licensees' reported shipment volumes, sales price and mix, offset in part by the proportion of licensee payments that are fixed.

There was no royalty revenue recorded from the Intel patent cross-license in the three and nine months ended September 30, 2007 because the term of the agreement expired in June 2006. As a result, royalties under this agreement decreased by approximately $20.0 million in the nine months ended September 30, 2007 compared to the same period in 2006.

As explained in more detail in "Risk Factors," Part II, Item 1A and Note 13. "Litigation and Asserted Claims" of the Notes to the Unaudited Condensed Consolidated Financial Statements, on February 2, 2007, the Federal Trade Commission (the "FTC") issued an order requiring us to limit the royalty rates charged for certain SDR and DDR SDRAM memory and controller products sold after April 12, 2007. The FTC stayed this requirement on March 16, 2007, subject to certain conditions. One such condition of the stay limits the royalties we can receive under certain contracts so that they do not exceed the FTC's Maximum Allowable Royalties ("MAR"). We are using our best efforts to comply with these orders. Amounts in excess of MAR that are subject to the order are excluded from revenue. To date, such amounts have not been significant. Depending on the final resolution of the appeal, we may or may not be able to recognize any excess amounts as additional revenue.

Product Licenses

In the three and nine months ended September 30, 2007, royalties from XDR, FlexIO, DDR and serial link-compatible products represented the second largest category of royalties. Royalties from XDR, FlexIO, DDR and serial link-compatible products increased approximately $0.9 million and $8.1 million during the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006. The increase for the three months ended September 30, 2007 was due to higher royalties for FlexIO and DDR2 products. The increase for the nine months ended September 30, 2007 was due to higher FlexIO, XDR and DDR2 products. In the future, we expect royalties from XDR, FlexIO, DDR and serial link-compatible products will continue to vary from period to period based on our licensees' shipment volumes, sales prices, and product mix.

In the three and nine months ended September 30, 2007, royalties from RDRAM-compatible products represented the third largest source of royalties. Royalties from RDRAM memory chips and controllers decreased $0.2 million and $2.2 million during the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006. RDRAM is approaching end-of-life and in the future, we expect RDRAM royalties will continue to decline.

Engineering expenses:

                                             Three Months Ended                                                Nine Months Ended
                                                September 30,            Variance in       Variance in           September 30,            Variance in       Variance in
(Dollars in millions)                        2007           2006           Dollars           Percent           2007           2006          Dollars           Percent
Engineering expenses
Cost of contract revenues                  $     4.5       $   4.3      $         0.2              4.7 %     $    14.8       $ 16.6      $        (1.8 )          (10.8 %)
Stock-based compensation                         1.3           1.8               (0.5 )          (27.8 %)          4.1          6.4               (2.3 )          (35.9 %)

Total cost of contract revenues                  5.8           6.1               (0.3 )           (4.9 %)         18.9         23.0               (4.1 )          (17.8 %)
Percentage of total revenues                    13.9 %        13.3 %                                              13.5 %       16.1 %
Research and development expenses               15.1          13.4                1.7             12.7 %          50.5         40.2               10.3             25.6 %
Stock-based compensation                         3.2           4.3               (1.1 )          (25.6 %)          9.8         11.4               (1.6 )          (14.0 %)

Total research and development expenses         18.3          17.7                0.6              3.4 %          60.3         51.6                8.7             16.9 %
Percentage of total revenues                    43.9 %        38.5 %                                              43.3 %       36.1 %
Total engineering expenses                 $    24.1       $  23.8      $         0.3              1.3 %     $    79.2       $ 74.6      $         4.6              6.2 %

Percentage of total revenues                    57.8 %        51.8 %                                              56.8 %       52.2 %

Total engineering expenses increased 1.3% and 6.2% for the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006. The increase for the three months was primarily due to increased compensation expenses of approximately $1.1 million associated with an increase in headcount and increased amortization expense of $0.5 million related to design software maintenance, offset in part by a decrease in total stock-based compensation expense of $1.6 million.

The increase for the nine months was primarily due to expenses associated with tax reimbursement expenses of approximately $4.1 million, increased compensation expense of approximately $1.6 million associated with an increase in headcount, increased information technology expenses of approximately $1.2 million and $1.2 million for increased amortization expense of design software maintenance, offset in part by a decrease in total stock-based compensation expense of $3.9 million. The tax reimbursement expenses are associated with the Company's decision to reimburse current and former non-executive employees for the Internal Revenue Code Section 409A penalty taxes imposed on them in connection with their exercise of repriced options in 2006.

In certain periods, the cost of contract revenues may exceed contract revenues. This can be a result of expensing pre-contract costs, expensing completed contract costs where the realizability of an asset is uncertain, and low utilization of project resources.

In the near term, we expect engineering expenses will continue to increase as we make investments in the infrastructure and technologies required to maintain our leadership position in chip interface technologies and increase headcount.

Marketing, general and administrative expenses:

                                           Three Months Ended                                                Nine Months Ended
                                              September 30,            Variance in       Variance in           September 30,            Variance in       Variance in
(Dollars in millions)                      2007           2006           Dollars           Percent           2007           2006          Dollars           Percent
Marketing, general and administrative
expenses
Marketing, general and administrative    $    14.1       $  11.0      $         3.1             28.2 %     $    41.9       $ 34.7      $         7.2             20.7 %
Litigation expense                            11.7           8.7                3.0             34.5 %          23.3         34.2              (10.9 )          (31.9 %)
Stock-based compensation                       4.1           4.4               (0.3 )           (6.8 %)         14.5         13.0                1.5             11.5 %

Total marketing, general and
administrative expenses including
stock-based compensation                 $    29.9       $  24.1      $         5.8             24.1 %     $    79.7       $ 81.9      $        (2.2 )           (2.7 %)

Percentage of total revenues                  43.1 %        52.5 %                                              57.1 %       57.4 %

Total marketing, general and administrative expenses increased 24.1% and decreased 2.7% for the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006. The increase for the three months ended September 30, 2007 was primarily due to higher litigation expenses of $3.0 million, higher expenses of professional and consulting fees of $2.5 million and higher marketing expenses of $0.6 million offset in part by a decrease in total stock-based compensation expenses of $0.3 million.

The decrease for the nine months was primarily due to lower litigation expenses primarily associated with a bonus paid to a law firm in 2006 of approximately $10.0 million offset in part by: increased professional and consulting fees of $4.2 million, tax reimbursement expenses associated with Internal Revenue Code
Section 409A of approximately $2.5 million, and increased stock-based compensation expense of $1.5 million. The tax reimbursement expenses are associated with the Company's decision to reimburse current and former non-executive employees for the Internal Revenue Code Section 409A penalty taxes imposed on them in connection with their exercise of repriced options in 2006.

In the future, marketing, general and administrative expenses will vary from period to period based on the trade shows, advertising, legal, and other marketing and administrative activities undertaken, and the change in sales, marketing and administrative headcount in any given period. Litigation expenses . . .