Rambus Stk Soars; CFO Sees Hitachi Royalties At $10M/Yr
By DONNA FUSCALDO
NEW YORK -- The days of tech-stock momentum mania might just be creeping back into the markets. Just look at shares of Rambus Inc. (RMBS).
In one week, the shares rose from 56 11/16 on June 15 to Thursday's close of 97 1/8. Now, after news late Thursday that the chip designer ended its lawsuit against Hitachi Ltd. (HIT) with a signing of a patent-license agreement, the shares recently were up another 18.4% to 115. As of midafternoon, volume was 23.5 million shares, compared with the daily average of 18.3 million.
As reported, Rambus had filed a patent infringement lawsuit against Hitachi in U.S. federal court, seeking injunctions against sales of products containing high-speed memory interfaces invented by Rambus.
On March 23, Rambus asked the International Trade Commission to investigate the importation and sales of Hitachi products which it claimed were covered by its patents. The suit also involves Sega Enterprises Ltd. (J.SEL), whose Dreamcast game system uses Hitachi microprocessors.
In a press release Thursday, Rambus said the agreement calls for Hitachi to pay an undisclosed settlement fee and quarterly royalty payments.
The question is how much will Rambus get in licenses for its dynamic random access memory, or DRAM, chips, since in the press releases Rambus makes no mention of money changing hands, said Preston Raisin, a managing member at Raisin Capital Management.
Gary Harmon, chief financial officer at Rambus, said that if royalties from Hitachi were at the low end, say 1%, Rambus would receive $10 million annually.
The DRAM business is a $20 billion industry, and Hitachi has 5% of that market, or $1 billion, Harmon said.
"Up until the Toshiba announcement people were looking at what Rambus DRAM would bring in, in terms of royalties, and now there are some real royalties," he said.
Investors are speculating that other chip manufacturers will also pay royalties. Harmon said Rambus is talking with other companies about royalty fees but wouldn't disclose which ones.
Seth Dickson, associate director at UBS Warburg LLC, said that the stock's recent surge was warranted, as investors are anticipating further licensing agreements.
"In my opinion there is a strong possibility that there will be several more licensing agreements and that the full impact of those... (is) not in the stock price right now," he said.
Dickson this week raised his 12-month price target on Rambus shares to $165.
But Preston Raisin of Raisin Capital Management said a lot of what is going on with Rambus' stock is a combination of speculation coming into the markets and short-covering by day traders,
Rambus' technology could potentially replace the current SDRAM standard. But most customers continue to request SDRAM, and the memory world isn't quickly moving to Rambus' DRAM, Raisin said.
-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5174 |
