Mike, thanx for your comments on Gemstar...
Gemstar & rambus comparison
It was pointed out yesterday that gemstar and rambus, as gorilla candidates, are distinctively different. I agree. As someone interested in trying to further understand GG theory, I thought it might be useful to try to describe the differences and similarities between these 2 gorilla candidates. The ideas below are just ideas; I am not wedded to them; the goal here is to learn and to get the ball rolling so as to hear from the rest of the thread. It is clear that many of us have invested in or are thinking of investing in Gemstar. As they will report earnings in the next month or so, it might be useful to better understand this animal leading up to earnings report.
Type of Gorilla candidate:
Gemstar: hybrid of enabling software/software application
Rambus: enabling hardware
Operating models:
Gemstar: IP, patented, fabless, low overhead, high margins
Rambus: IP, patented, fabless, low overhead, high margins
Present Earnings:
Gemstar: positive, from VCR +;
Rambus: Positive, from 1st generation RDRAM, now in Nintendo video games
The Promise:
Gemstar: Guide+, serving as an electronic program guide and the primary TV portal for satellite, Dsl & cable broadcasting, capturing the eyeballs of the USA, Japan, Germany, England and other countries thereafter; potential for revenues due to being the portal, but also from advertisements/B2C commerce; may later be a portal over TV for internet access. What I like about the portal/eyeballs concept, is that Wall Street has already been instructed on this by Yahoo, AOL and even Amazon; hence, Wall Street should quickly recognize the same potential in Gemstar and bless the share price accordingly.
Rambus: DRDRAM, a memory architecture with the greatest proven bandwidth potential; should enable future killer apps like speech recognition, and should enable present and future Intel processors so as to better unleash their processing power permitting Intel to extract higher margins; slated for video games, workstations and high-end corporate PCs to start
Location in the Technology Adoption Life Cycle (TALC):
Gemstar: across the chasm, in the bowling alley, tornado watch in effect
Rambus: on the far side of the chasm, but not across (thanx again Intel)
Degree of Complexity that could hinder adoption:
Gemstar: software that seems to work, easy to install; easy interactivity by end-users
Rambus: complicated architecture which is finicky, expensive to test and validate;
Switching Costs:
Gemstar: I dunno; seems like any switch is dependent on weakness in Gemstar patents; my question here to our lawyer friends would be how invulnerable Gemstar patents are. Not hard for home consumer to switch because of relative inexpense of STBs, TVs, and VCRs. Harder to switch from cable provider given present local monopoly the cable companies enjoy (at least in my area).
Rambus: High; tough to switch once the DRAM manufacturers have invested millions in testing and production equipment
Competition:
Gemstar: TV guide, with ~ 25% market share; cable companies reluctant to pay royalties or to license an IPG when in years past earlier IPGs were not a major cost to them; hence, present day litigation
Rambus: at low-end, PC 133 SDRAM; at high end, nothing today, but by next year, possibly DDR DRAM; DRAM manufacturers reluctant to pay royalities on memory design, which in years past was without cost to them
Big brothers:
Gemstar: none, with contractual relationships widely diversified
Rambus: Intel and Sony, then many lesser relationships
One trick pony?
Gemstar: 2-tricks; has VCR +, & Guide +; the latter has multiple possible revenue streams.
Rambus: 1-trick; but revenue streams from this single trick are multiple, including pc?s, graphics cards and video games; hinted at, but unproven are high-end printers, networking equipment, servers, notebooks, wireless appliances, high definition TV.
The better investment, based on available information, at this moment:
Gemstar: safer because it is further into the TALC; in terms of returns, I dunno
Rambus: riskier, both because it is not as far into the TALC, and because the Intel-related delay in adoption may allow competition (DDR DRAM) to get a foothold; in terms of returns, could be staggering given the trends in memory needs outside the PC industry and the general trend towards greater bandwidth. However, I frankly believe that it is a little ahead of its time for PC apps today; appropriate in next gen. Video games; estimated minimum 5-10 bagger in 2-3 years if it tornadoes.
Hope this helps with people?s thinking. Again, these are ideas, not firm convictions. But it would be good to hear from the thread, so as to tweak, refine and make more accurate this list. Also, I wonder if it is too early for some smart accountant-type to estimate share price growth for us if Gemstar tornadoes over the next few years.
Apollo |
