Good yahoo post.
The reason I like RMBS is (1) they will soon have net margins after taxes of 65% (not a typo); (2) they currently have free cash flow which is greater than all revenues reported; (3) they have over 90 patents related to fundamental enabling technology of all high-speed chip to chip communications deployed today; (4) the first market they are targeting is the DRAM market. To date they have signed up 52% of the entire, enormous DRAM industry, which pays RMBS royalties on all forms of modern computer memory, SDRAM, DDR, and RDRAM; (5) RMBS also has key IP on all chip to chip communication. Of note is RMBS' recent demand that Nvidia pay RMBS royalties on their VooDoo graphics card; a RMBS controller will be used with almost all 3G cell phones if they have a DSP embedded (RMBS owns the IP on the controllers); RMBS will also be collecting royalties on each CPU sold since RMBS owns the IP on the controllers; as well as RDRAM becoming dominant in set-top boxes, game machines, HDTV, and gaining a foothold in servers (EMC's latest NAS offering uses 2-8 Gb of RDRAM) and communication chips as PMCS and VTSS are using RMBS IP for communication chips.
In general, if two chips need to speak to each other in any manner other than via flash memory to CPU or possibly some sort of embedded DRAM manner (this is still being debated) RMBS is the toll-keeper for the entire industry.
What is even better is RMBS is currently selling for dirt. Its projected long-term earnings growth rate is 90% per year (can you find any other stock with such a LT growth rate?); faces no competition, no real marketing expenses, manufactures nothing, and has already developed the next 2 generations of RDRAM.
As a clue as to how well positioned Rambus is, INTC is currently paying DRAMs $70 per RDRAM chip they ship (subsidizing for their production); in addition Intel invested billions to finance the DRAMs to be able to spend the billions necessary to invest in RDRAM manufacturing equipment, and INTC's just introduced P IV, which is a entirely new architecture, is crippled without RDRAM. As much as the press hollers about DDR, DDR is the way to go (and RMBS actually makes more money off of DDR), no DDR systems are shipping, only Micron is offering a DDR computer at this time (and that is delayed until at least February now, from an October launch date), and DDR peters out, it cannot scale.
This leave RMBS without real competition until at least 2003 or 2004 when vapor ware announcements may make their way to market. Including DDR-II. Problem, DDR-II, even though it is at least 3 years away from design, already is slower than currently produced Quad Speed RDRAM.
Try a discounted cash flow analysis. You will probably not see a more undervalued stock since QCOM in early 1999.
The only real risk in the stock is litigation with Micron, Hyundai and Infineon. I've looked at the cases, and the cases for these DRAMs are very weak. Never totally discount litigation, but over 1/2 the industry has already signed on, and this litigation looks more like a traditional strategic delaying tactic than anything else.
But oh my, so much for being short. Geoffrey Moore in the Gorilla Game specifically mentioned RMBS as an upcoming Gorilla in 1998, and sure enough, it is today.
Other major problem with RMBS is a concerted FUD campaign (the same type INTC used when RISC threatened its CISC market...INTC literally went on a FUD campaign to discredit RISC, even as it entered into an agreement with Hewlett Packard to move to RISC, as well as the same sort of FUD campaign brought against QCOM which kept QCOM artificially low until it took off in early 1999. QCOM did so well last year because it was so darned underpriced on a discounted cash flow and competitive advantage basis that it had no where but up to go.
But enough. Do your own DD. I suggest very thorough DD because no headline with RMBS can be understood with out a complete understanding of the technologies involved, that there is no real substitute for RDRAM, the enormous size of its markets, the politics involved, etc. I made a killing on RMBS earlier because once your informed you can see the FUD is fool of crap and thus was able to interpret information better than the market did. RMBS is that cheap again despite the fact everything is going RMBS' way.
Author was tinkershaw
Jack |
