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Politics : Formerly About Advanced Micro Devices
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To: kash johal who wrote (117232)6/22/2000 8:36:00 PM
From: Petz  Read Replies (1) of 1579980
 
kash, re:<If the memory market is 100Bn within 5 years (WAG on my part) a 2-3% royalty is $2-3Bn.

And most of that is profit.

I can see a valuation on par with say qualcomm of $50-60Bn.>

If we have profits rising slowly from nil to 2.5B over five years, and then declining at, say, 15% per year, the profit stream would be:
PROFIT NPF@15%/year discount
0.1B 0.1B
1.5B 1.3B
1.7B 1.2B
2.0B 1.2B
2.3B 1.2B
2.5B 1.1B
2.3B 0.9B
patents expire

Tad LaFountain valued AMD by discounting future profits by 20% per year on the theory that AMD's earnings could "blow up" with 15% probability +5% interest rate.

Even if I'm generous and discount at 15% per year, Rambus is only worth $7B.

If I saw some evidence that Rambus would have future variations better than RDRAM, i.e., if they were spending 10% as much on IR&D as the entire remainder of the memory industry,

thats a big, big IF... (actually an IMPOSSIBLE IF)

then I could see valuing an earnings stream beyond 2005.

$7B valuation is about $73 a share.

Petz
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