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Technology Stocks : Rambus (RMBS) - Eagle or Penguin
RMBS 95.53+0.7%Nov 28 12:59 PM EST
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To: unclewest who wrote (26151)8/1/1999 9:49:00 PM
From: Jdaasoc  Read Replies (1) of 93625
 
Unclewest:
The way I see it. My analogy of what RMBS will look like is an insurance company. You will extensive cash reserves with RMBS earning interest like an insurance co. You can equivalence royalties percentage earned with single digit profit margins in insurance business.

Let's assume that RMBS is wildly successful. Royalties rise from $10M in 1999 to $200 M in 2009 in a linear fashion. However, earnings plateau at that level and start to trail off as newer technologies and patents expire. What will we have RE RMBS.
Let's see: They take in $1 B in royalties over 10 yrs. less expenses and taxes leaving about $500 M in cash earned over 10 yrs.; add in $60 M on books in 99; plus $70 M for accrued interest on invested cash and remaining contract revenue to be earned. The grand total is $ 630 M or approx $21 book value(assume 30 M shares outstanding in 2009; MANAGEMENT will not work for salary only).
That $21 book value will generate $ 1.05/sh @ 5% plus $3.33/sh in net royalty income or $4.28/sh. Since it will not be a hi earnings growth business model, let's give it a P/E 30. I see RMBS stock price as $129 in 2009.

If you can forsee a higher plateau level of royalties or extention of patents beyond 2010, then RMBS stock should be valued higher in 2009.

jd
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