Rambus (RMBS) - Eagle or Penguin Message Board

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Technology Stocks : Rambus (RMBS) - Eagle or Penguin

RMBS 88.13

+1.0%

Nov 21 9:30 AM EST

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To: Gary105 who wrote (37419)	2/23/2000 5:52:00 AM
From: Ian Anderson	Read Replies (4) of 93625

Rambus Earnings projection and valuation This splits in two parts Dram Royalties, and controller royalties. I have assumed that 1) Intel controller revenues are negligible 2) Once RDRAM is ramped, each RDRAM device sells for an average of $20, at 1.5% royalty, Rambus gets 30c per device 3) 65% of RDRAM production goes into non PC devices with an average of 2 RDRAM chips in each (as PS II), and for each of these devices RAMBUS gets 50c 4) Rambus does not prevail in the suit against Hitachi 5) 25M shares outstanding, after warrants exercised 6) 50% of revenue gets to the bottom line after tax year DRAM Market Market Share DRAM Revenue Controllers 2000 40Bn 10% 60M 32M 2001 50Bn 30% 225M 122M 2002 60Bn 60% 540M 293M 2003 60Bn 70% 630M 341M And therafter I would expect revenues more or less flat for 2 or 3 years, before tailing off substantially unless Rambus comes up with a second trick. With a cash pile or investment portfolio, but no growth prospects it should have a PE like a utility, but the market may be slow to recognize this, and the PE and price will slowly decline. year EPS PE Price Cumulative earnings 2000 1.8 100 $184 76M 2001 6.9 80 $555 362M 2002 16.6 40 $666 778M 2003 19.4 20 $388 1263M 2004 20.0 15 $300 1763M 2005 20.0 10 $150 2263M 2006 10.0 5 $75 2513M 2007 on 10.0 (10% ROI on cumulative earnings) So my conclusion is that by a rational valuation this is not a value stock, its market cap exceeds its next seven years earnings (the entirety of the life of its technology's value) But remember what Zeev says about when the TA and the FA don't Jive. In the short term believe the FA. Ian

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