Rambus...
Now that Rambus has released their quarterly report we know that Q2 revenues doubled versus last year, but there was a 10% sequential decline. I remember that you were thinking this calendar year would be a huge year for Rambus's revenue, making you very optimistic about the stock price over the same period. Any confirmed or new thoughts about Rambus as a result of the quarterly report?
CC notes:
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Hi Mike. I'm no substitute for TinkerShaw, who I believe has reduced his portfolio position for Rambus in response to the Market downdraft this year to date. Nevertheless, I'll make a few remarks.
1. Rambus apparently reports revenues, which are a qtr behind after realizing royalties. Hence, their quarterly report last week reflects on Rambus royalties for the period Oct - Dec, '00. They report a 20% gain in RDRAM unit sales for that period, and already know that another 50% increase took place in Jan-March, '01, which will be reported in July.
That's a 70-80% gain in half a year, which when annualized is tornado territory.
2. Obviously, the Pentium IV, the MAIN DRIVER for RDRAM was just released in Oct-Dec, '01, so these numbers are neonatal in the ramp-up to come. As posted from the CC, Pentium IV sales should near 20 million (in a slow year), Sony Playstation 2's should hit 20 million, and even HDTV in Japan should hit unit sales of 2 million.
This is just the beginning. If one goes to the Intel Web site, and looks up info at the IDF section, slides from that conference show numerous memory manufacturers describing their ramp-up of RDRAM; Intel predicts half of all PC memory to be RDRAM by end of 2002.
3. The Infineon trial is underway. Personally, I think Rambus is a solid gorilla candidate, and will appreciate in value over time, regardless of how it does this year in the Infineon, Micron and Hyundai trials over patent rights to SDRAM and DDR. Nevertheless, the uncertainty over trial results, in conjunction with this lousy market and sentiment, have dropped the stock value to levels not seen since 1999. The litigation costs are more than what Rambus anticipated, running in the many millions per quarter; hence, earnings were down from what had been anticipated this past quarter. If one subtracts the cost of litigation, then EPS are reckoned to have exceeded Analysts' estimates by several pennies. Additionally, the SDRAM royalties that Rambus collects from the 40% or so of memory manufacturers, is selling below cost, and these less than expected sales need to be factored in.
4. Stepping back and looking at the BIG picture, it is clear that Rambus, the company, is much more strongly positioned now than in 1999 when I first began to follow it. Yet the stock price has been volatile, and is priced at 1999 levels. Since then, we have the following progress:
a) Pentium 4 ramp-up in progress, for high end desktop PCs now, and mid-level in 2002.
b) the Intel 850 chipset, which works better and more reliably than the original screwed up 820 chipset, allowing communication between the RDRAM and the CPU.
c) Sony Playstation 2 is the best video game on the market, and is perpetually sold out.
d) EMC released Storage hardware at the outset of 2001, employing RDRAM.
e) in Japan, HDTV is being sold, with RDRAM contained therein.
f) the only competition is DDR, which cannot scale to Intel's microprocessors as they hit multi-Gigahertz levels. The 2 gig Pentium IV is expected by this summer.
g) RDRAM dominates the workstation market by 75% or more, at this time.
h) and finally, MSFT is coming out with a completely new OS in Windows XP over the next 12-18 months. This is expected to require hardware upgrades, and should require much more memory capabilities from the PC. At least, those are the rumors.
I have a buy in to double or triple my shares in Rambus.
Thanx for your interest, Mike.
Apollo |
