Rambus (RMBS) - Eagle or Penguin Message Board

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Technology Stocks : Rambus (RMBS) - Eagle or Penguin

RMBS 94.23

-1.4%

Dec 1 3:59 PM EST

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To: Richard Habib who wrote (47182)	7/13/2000 6:01:05 PM
From: Joe NYC	Read Replies (1) of 93625

Richard, If one assumes $55B and RMBS has 75% roy at 1.5% with 97.5% GM and normal tax rate one gets about $4.50 earnings per share. (Includes some chip to chip interface rev that according to Tate will be coming on line at that time.) At share price of 100 that yields a PE of about 22 just as the DRAM cycle contracts. So RMBS may be near fully valued thru the peak of this cycle. If I have a $1 lottery ticket in my hand with jackpot of $10 million (before the drawing) what is the fair valuation of this ticket? Based on the above, it would be $10 million. In reality it is $1 minus the house mark-up. What is the probability that Rambus will collect this much in royalties (1.5% royalty on 75% of 55B DRAM market)? It is not 1. Probably a better way to go about it would be to come up with an "Expected Value" of the percentage of DRAM market Rambus will collect royalties on (rather than using 75% number - unless that is your "Expected Value"). Anyway, you can break it down to RDRAM expected market share and non RDRAM. Royalty on RDRAM portion is known (I guess) + probablility of Rambus collecting royalties on non-Rambus memory. Joe

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