Q&A with Daniel A. Baker, President & CEO, NVE Corporation [Nov 04]

MRAM-Info.com recently had the opportunity to interview Daniel A. Baker, President & CEO, NVE Corporation.
NVE develops and sells devices using "spintronics" - a nanotechnology which utilizes electron spin rather than electron charge to acquire, store and transmit information. NVE is a licensor of spintronic MRAM, and lists Motorola, Cypress and Agilent as licensees. NVE also sells sensors and couplers.
NVE trades in the NASDAQ (ticker is NVEC).

Q: Daniel, thanks for taking the time for this Q&A with us. Let's start with the latest Motley Fool report ("NVE's Nanotrap Only Snares Speculators")... Can you give us your answer to the Fool's article in your own words?
A: We strongly disagree with the characterizations and conclusions about NVE drawn by the reporter.

• Our MRAM patents are viable and valuable;
• Our licensing agreements have strong potential;
• MRAM has the potential to revolutionize memory design and NVE is in a good position to capitalize on the commercialization of MRAM technology.

Q: So do you have a 'watershed' patent on MRAM? Will you be able to defend this patent?
A: Our patents are a matter of public record. We're also on record in a recent SEC filing saying that we know of no practical alternative design being pursued by potential MRAM suppliers that could be sold in commercial quantities in the foreseeable future.

Q: What's up with Freescale? They are getting closer to actually producing MRAM, but still no news on the licensing deal. Can you give us an update?
A: We have had discussions with Freescale concerning the possible structure of a new agreement or an assignment of the Motorola agreement with amendments. We're committed to provide specifics when we can.

Q: Can you give some updates on Cypress's MRAM? NVE will have rights to re-sell Cypress's MRAM (This is not a pure licensing/royalties deal). Have you started to approach customers? Which markets will you be targeting?
A: Cypress has indicated they have made working MRAM and that they expect to sample devices by the end of the year. The first NVE products will be 64 kb to 256 kb MRAMs targeted at mission-critical replacements for battery backed-up semiconductor memories. That's a high value-added application in markets we're strong in : industrial/process control and military. We've started to approach potential customers.

Q: Who do you think will be first with real production of MRAM? Cypress or Freescale? Can you comment on the differences between the two companies MRAM projects? (Such as size, techniques and target markets)
A: Cypress and Freescale are both very capable; I wouldn't want to make predict who will be first. Cypress is initially targeting drop-in replacements for low-power SRAMs, so their design tradeoffs would tend toward low power rather than the highest speed, and lower density.
Motorola has said they see the stand-alone device as an intermediate step in their goal of embedded MRAM, that is MRAM combined with conventional electronics on the same chip. Their design trade-offs might therefore tend more towards density and speed.

Q: Can you give us your own, prediction about MRAM timeline? End of 2004 should see sampling by both Cypress & Freescale of small (64K-256K) modules. When will we see true production? When will we see a 32MB MRAM module? When will we see a H/D replacement (>10GB) of stacked MRAM modules?
A: Cypress has said they expect to see production in early 2005; Freescale has said 2005. As far as the rate of density increase, Motorola has demonstrated a six-month cycle. That compares to about a two-year cycle for conventional memories, meaning density doubles roughly every two years.

Q: When can we expect products with NVE's MRAM to reach the market?
A: The next milestone is working samples based on our joint designs with Cypress, which Cypress has said will be this year. We hope to introduce products at roughly the same time as Cypress.

Q: Should we expect other licensees besides Freescale and Cypress?
A: Acquiring additional licensees is a key part of our business strategy. NVE has a strong intellectual property position in MRAM and many companies are interested in the potential of the technology.

Q: What can you tell us about IBM and Infineon MRAM project? Are there any licensing talks with IBM?
A: Our licensees, specifically Motorola and Cypress, appear to be well ahead of the field in the race to commercialize MRAM. We have had discussions with a number of potential licensees. There have been reports that the IBM-Infineon MRAM partnership is being unwound.

Q: Will IBM or Infineon continue on their own? Together with the recent news that Micron abandoned MRAM for other RAM technologies, and it spells trouble for MRAM. But potentially this might be good news for NVE. What do yo think?
A: I've heard IBM and Infineon are winding down their business partnership. I believe both are continuing MRAM development independently, but questions about their plans are better answered by them. In any case, it appears our licensees have a lead, and that may speak to the value of our intellectual property.

Q: Any updates on the Magneto-Thermal MRAM?
A: We have two major magneto-thermal MRAM programs: a contract announced August 2003 from the Defense Advanced Research Projects Agency (DARPA); and a contract announced November 2003 awarded by the Defense Threat Reduction Agency (DTRA). Both are two-year programs (to be completed next year) with a goal of showing the design feasibility of one-gigabit MRAMs.

We are working on two magneto-thermal MRAM approaches: the DARPA contract is to impart magneto-thermal properties to the free layer of the memory cell (what we call "Curie-point writing"); the DTRA contract is to design magneto-thermal properties into the fixed-spin or "pinned" layer (called Ne'el-point writing). There are advantages to each approach, and both have the potential to allow MRAM to be fabricated at bit densities comparable DRAM. Magneto-thermal MRAM is covered by a number of our patents, including the 6,535,416 patent.

Q: What kind of devices do you expect will embed MRAM in the first stage?
A: High-volume devices where miniaturization is important such as consumer electronics like MP3 players and portable games.

Q: When do you expect MRAM to be competitive in mobile devices such as cellphones?
A: Cellphones are cost sensitive and require fairly large memories, but I'd guess we could see MRAM in mainstream cellphones in a couple of years.

Q: Where do you see MRAM in about five years?
A: MRAM could bring a generational advance in memory technology. I can remember when semiconductor memory emerged in the early '70s. It forever changed electronics and computing, and MRAM could be as important. In five years MRAM could become the "universal memory" - fast, dense, and nonvolatile--at the expense of SRAM, DRAM, and Flash.

Q: Where do you see NVE in about 5 years?
A: Our goal is to be the leading supplier of spintronic and MRAM intellectual property as they become mainstream technologies.

Q: You see the future of NVE as an IP company. Don't you see NVE as a major supplier of MRAM modules itself? Don't you see the Cypress MRAM as a major income source for NVE?
A: We see great potential for selling MRAM based on the Cypress/NVE designs, and that's one way we plan to monetize our IP. We plan to be a memory supplier, but we do not plan to be a memory manufacturer.

Q: What do you think about other Next Generation RAM technologies such as OUM or FRAM?
A: From what I know, OUM is interesting technology, but MRAM has a number of advantages, and we believe MRAM is much closer to commercialization, more producible, and more scalable than OUM and other "next generation" memory technologies. FRAM is limited to niche applications because of limited endurance caused by wear-out mechanisms plus the complexities and speed degradation caused by destructive data reading.

Q: I'm personally holding shares in NVE. There has been a lot of discussion in the chat rooms about NVE lately. The watershed patents, the selling of stocks by insiders, lack of news, etc. Can you address your shareholders on these issues?
A: I'm very impressed with how well-informed and savvy our shareholders are. Most understand that intellectual property companies need to be careful what they disclose to avoid violating confidentiality or compromising their negotiating positions. I know it can be frustrating for some shareholders, and we try to be as forthcoming as we can.

We believe passionately in NVE’s future. There have been some transactions by some of our management for diversification, tax, and estate planning purposes, but it is important to know that each of our officers retain significant exposure to the company’s stock price. I have increased my stock holdings this year in addition to maintaining a significant option stake.

Thank you very much for this interview, I wish both you and NVE good luck!