2009: Rambus' Year to Shine
Prufrock- seeking Alpha
A watched pot never boils. So goes the cliché. But, we all know that it’s not true. It just seems like it will never boil. If enough heat is applied, the teapot will whistle.
Another cliché goes like this: never invest in a litigation stock. While this can be valuable advice, there are exceptions. Certainly the Qualcomm (QCOM) price explosion in December of 1998 was a classic example. Ericsson (ERIC) was convinced by the courts that CDMA was the way of the future, and that it must be licensed. QCOM stock price went from $3.23 on Dec. 31, 1998 to peak at $100 within a year, but of course that was during the bubble years.
However, Rambus has one thing going for it that Qualcomm didn't. Rambus technology has already been adopted by every DRAM manufacturer and is in virtually every electronic gadget sold around the world today, from cell phones to HDTVs.
There are many students of the Rambus story who feel that Rambus Inc. is poised to follow a path similar to QCOM's epic ascent. The bubbles have risen lately in the tea kettle and 2009 appears to be the year that Rambus stock price will take off. Kevin Landis, analyst for First Hand Tech, Leader’s Fund, played an important role in QCOM’s stock reaching the tipping point. At the beginning of this year, he picked Rambus as the number one stock of 2009.
In March of the year 2001, Rambus stock thundered to a high of over $480 per share (split adjusted $120). It did so because of its phenomenal patented discoveries which unblocked the bottleneck between memory and the CPU. Rambus inventions transformed the interface forever allowing voluminous transfers of data many times those of the past. Now, some 8 years later, Rambus stock sits at below 10 dollars a share! What happened?
As those familiar with the facts of the case know, the Memory Makers (Hynix, Samsung, Micron, Infinion, and others) conspired to “kill” Rambus and take its valuable discoveries, incorporating them in their standardized DRAM. Technology titan Intel had discovered the value of Rambus proprietary DRAM (RDRAM) early on. It adopted RDRAM for its Pentium processors because it was the best DRAM in the world at the time.
The Memory Makers (MMs) freaked out at the thought that Intel and Rambus would combine to make them mere DRAM foundries. Thus, they illegally conspired to ruin Rambus. They proposed a three pronged attack: 1. coordinate law suits to litigate Rambus to death, 2. smear Rambus with a paid media campaign which would undermine the company’s credibility and spread mendacious claims about them, and 3. Hynix and Micron would use their considerable political clout to get the FTC to charge Rambus with fraud and deception at a Standard Setting Organization. This highly organized and funded conspiracy was very effective. It has taken Rambus a decade to disprove the trumped up charges in the press and at the FTC. Earlier this month, the Supreme Court finally slammed down the lid on the FTC charade.
But, something strange came out of that FTC witch hunt. Rambus managed to get their hands on some documents which implicated the MMs in an antitrust conspiracy. Rambus was compelled by the volumes of incriminating records to file an Antitrust Case (AT case) against the MMs. On 05/05/2004, Rambus filed an antitrust suit against Hynix, Micron, Samsung, and Siemans at the Superior Court of the State of California. "We can't ignore the strength of this evidence," said Rambus formerr general counsel John Danforth. "We have a fiduciary obligation to our shareholders to do something about this." This case will finally come before the court on September 28th, 2009. Currently, numerous summary judgments are being ruled on in this case, with Rambus having won every summary judgment thus far. The last three summary judgments are scheduled to be heard on March 16th in San Francisco Superior Court.
There are several streams of bubbles rising through the hot water (I can think of at least five others at present) that I may write of in the future, but it is the AT case that will most probably blow the lid off this stock.You see, the Rambus share price of $480 in 2001 was the beginning estimate of the earnings Rambus would achieve in the coming years. Most of that promise will be included in the damages of the AT trial. It is currently estimated at 4.3 billion dollars, subject to automatic trebling in this instance. Rambus stands to win over 13 billion dollars.
Will Rambus prevail in this trial scheduled for September in the court of Judge Kramer in Northern California? Those knowledgeable predict that the MMs will never go to trial, that they will be forced to settle before trial. The incriminating documents that Rambus possesses are lethal. For instance,Willi Meyer of Infineon (then part of Siemens) in 3/1994, said the following:
"Rambus is not a memory, it is a memory system that includes, controller, bus, interface, protocol and memory. One day all computers will (have to) be built like this, hopefully without royalties going to Rambus."
In addition to hundreds of such damning remarks, the MMs already have confessed to conspiracy to fix prices in the DRAM industry (including RDRAM) before the DOJ. The MMs cannot afford to let the details of their collusion into the public domain. Otherwise they could be facing a long train of class action suits from shareholders and others for their misdeeds.
Should you doubt the veracity of this article I suggest a visit to Rambus.Org where you can read the facts for yourself.
As for me, I’ve placed my tea bag in my mug. I’m planning a nice cup of tea.
Disclosure: I am long Rambus stock.
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