Rambus (RMBS) - Eagle or Penguin Message Board

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Technology Stocks : Rambus (RMBS) - Eagle or Penguin

RMBS 101.61

+2.8%

Dec 5 9:30 AM EST

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To: unclewest who wrote (29670)	9/16/1999 8:32:00 AM
From: wily	Read Replies (1) of 93625

uncle, With NEC and probably Micron joining the flow soon, Rambus looks to be on track as far as DRAM expectations. I still have reservations about the Rambus market cap. If Rambus earns $1 next year by winning 25% of the DRAM market, and then (adopting an optimistic view) wins 100% of the market for the following 5 years, assuming a constant DRAM market-size, that would give Rambus earnings of $4 in each of those following years, for a total earnings over the six years of $1 + 5 X $4 = $21 Times 25MM shares, that's still only half a billion dollars. But Rambus is priced at 4+ times that now. I realize that stocks are supposed to have a PE value, but that assumes that the company will continue growing indefinitely. How do you put a PE on a company with a 5-year life-span? If they can manage a 15% return on their capital at that point (six years from now), their earnings would be 0.15 X 500MM = 75MM or $3/share Then, with a PE of 15, the price of the stock would be $45 (six years from now).

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