Rambus (RMBS) - Eagle or Penguin Message Board

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Technology Stocks : Rambus (RMBS) - Eagle or Penguin

RMBS 96.29

+2.2%

3:59 PM EST

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To: unclewest who wrote (27095)	8/14/1999 9:17:00 PM
From: Steve Lee	Read Replies (2) of 93625

This factor of 16 or 32 argument does not compute. As the game platforms increase their demand for RAM, the price of RAM falls. It is very likely that 16MB next year will be at the same cost as 4MB now. As RMBS are paid a royalty based on cost, rather than number of units sold, RMBS earnings will rise proportional to cost of RAM sold, rather than megabytes sold. So if RMBS is already in nearly 50% of games platforms and have miniscule earnings at present, 100% game platform market penetration will yield an income from that platform that is at most, double the current amount i.e. miniscule. I think the RMBS earnings hinges almost entirely on sales of RAM for PCs. Samsung reckon the total market for RDRAM in 2001 will be 13.5 billion. Assuming a royalty rate of 1.5%, that amounts to a lot less than $12 per share. Once the RDRAM market has reached that level, where is the future growth coming from. The outlook becomes worse when you consider the cost of additional R&D just to stand still relative to alternative technologies. There will also be numerous lawsuits related to patent protection that will add to costs. So the present valuation seems to depend on taking the best view of all the scenarios. Should RMBS get hit by alternative competing technology, the stock price cannot be justified. There seems to be a lot more downside than upside to this. Of course, I am only considering the royalties from RDRAM sales for the PC market. I see all the other design wins but don't think they are particularly significant compared to the PC market. Additional revenue may come from sales of non-RAM products such as chipsets, processors etc. Are royalties charged on the RDRAM interface for these items? If so, what could these items add to revenue?

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