Zeev, here is a Feb 17 (30 days ago) post of yours to me on RMBS valuation. we were talking 500 end of year or so. How would you update your thoughts. (I so want to hold all my RMBS and no;t sell any more.) TIA
<<<jhg, here are few responses you can give, if the technology hold, then we are talking a minimum of 7 years (SDRAM life time from 1995 to 2002?). The total volume of DRAM, will be much larger than $25 billions, some estimates are as high as $60 billions in three years, I have about $40 B in three years. RMBS keeps 100% of the revenues, they do not have "gross margins" and their fixed costs will not increase with revenues that much. They get 1.7% on drams, but higher percentage on other devices such as DSP, ASIC etc. There is still a little controversy I was not able to clarify and that is the pronouncement of Tate that PC will be just 35% of their revenues, but I am not sure how much non PC revenues are DRAM revenues (like RIMMs, ASIC, controllers in HDTV, chipsets controlling drams etc.).
Finally, I believe they are already working on next generation system post the first 7 to 10 years we discussed.
Last, this market is no longer valuing companies based on discounted future cash flow, at best on a PE of future earnings, so, if you take sometime in the next four years, shipments of $30 Billions of RDRAM on which RMBS gets about $500 pretax and $300 MM after taxes, you get some $12/share earning without the non dram royalties. You make some assumptions on the rest (like double it) and apply to that a "then market multiple" and you'll see that $500/share is not so outrageous after all.
Zeev>>>
jhg
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