RAMBUS (NASDAQ: RMBS) – Internet Gasoline
By
Rolv E. Heggenhougen
One stock in the universe of stocks has shown up on many radars since its IPO in the summer of 1997: Rambus (NASDAQ: RMBS).
I believe this is the one stock that can outperform all others during the next 2-3 years. This article explains why I have this strong belief and also attempts to explain what kind of company Rambus really is. Rambus is difficult to understand as it does not fit in any of the standard "boxes" that classify stocks; even the analysts that follow the stock all have Rambus in the wrong category by my assessment. That is why I have tried to use an easy to understand analogy to describe this incredible company.
Rambus is an IP company, i.e. Software company, serving the Semiconductor industry
Contrary to popular belief among analysts Rambus is not a semiconductor stock but rather a software stock with attributes like an Internet stock.
Rambus has a flurry of patents on a brand new design for increasing the internal speed of computers, DVD TV's, Network Hardware and any other hardware that require high speed internal transfer rates of data. This prevents the bottleneck that has developed due to the vast improvement in CPU processing speed as compared to the lagging behind of memory. Rambus does not manufacture anything but rather licenses its patented technology to the semiconductor industry and receives royalties based upon units sold and sales price. Just like Microsoft does not sell its source code but rather "licenses" the use of it in selling its software packages, Rambus is a software company!
An explosive potential put in layman's terms, the introduction of RGAS:<O:P
Imagine simultaneous launching of brand new car (read: computer) engines from the worlds leading engine-builders (read: new CPU's coming from Intel, Compaq/Alpha, IBM, AMD and NS/Cyrix). Consider this: they all run on the same powerful fuel-formula called RGAS (yes, that stands for Rambus GAS) and…
ONE company, who has patented the formula, receives royalties on all the fuel sold.<O:P
Now imagine further that 98% of the Mobil Oils of the world (read: memory from Micron, Samsung, Toshiba, LG Semicon, Hyundai, Siemens, IBM, NEC, OKI, Fujitsu and more) have signed a license with this ONE company and will pay a royalty for every gallon sold.
Further imagine that most of the world's leading automakers (read: PCs from Compaq, IBM, Gateway, DELL, ACER to name a few) have announced that they will buy these engines and the RGAS that makes them perform beyond any other fuel-mix.
THAT is exactly what has happened and Rambus is that ONE company.
Now consider this: These new engines (CPU's) and the cars (computers) they go into are about to enter the market within the next few months and the fuel is being produced as we speak.
Would you consider buying the stock of the company that owns the formula for RGAS? The company that is about to get an enormous growth in revenues the minute these new cars hit the street?
Would you like to look into the future more before you decide? Let's imagine that this fuel, RGAS, can be used in new revolutionary engines that power airplanes (read: Digital TV's) and that all major manufacturers of airplanes have decided it will be the new standard, would you be more convinced?
Internet gasoline
The requirement of better gasoline (RGAS) is based upon a huge future demand, stemming from the explosion of the Internet and the soon forthcoming merger of Internet, telephone, radio, video and digital TV. The requirements for memory and bandwidth transfer rates (1.6GB/sec and up) are huge and only one company has the solution available today: RAMBUS.
Now can you relate? The stock market has shown us that people can relate to Internet companies – hopefully now you can see the tremendous potential of Rambus.
The conclusion
In my personal opinion Rambus is the stock with the most upside potential I've seen since the dawn of Microsoft. The problem has been for people outside the semiconductor industry to understand what kind of company it is and what the potentials are – I hope I've made a clearer picture. Some smart people, according to my sources, saw this potential at an early stage and invested in Rambus. Among these you find both Bill Gates and Michael Dell.
We are at the dawn of a new revolution, sort of like sitting on top of a volcano that just has begun to rumble. Rambus, in my honest opinion, will receive, in the next few years, a windfall of earnings from this revolution and the requirement for RGAS (or in semiconductor language: RDRAM – Rambus Direct Random Access Memory). The numbers are truly astonishing. According to one analyst that covers the company, Rambus' potential revenue in 2001 is $400M only from DRAMS. This compared to total revenue in fiscal 1998 of $37.9M!
My personal belief is that Rambus' stock ($75 1/8) should reach $400 within two years and is very cheap at today's price when one considers the future potential.
This "article" is unsolicited and nobody has commissioned me to write it. I have done so only to share what I believe to be a unique and fantastic opportunity. Investing will always be associated with risk and anything can change at any time – so also for Rambus – and the entire investment can potentially be lost.
January 30th, 1999
The author is an indirect investor in Rambus.
Any and all duplication and/or publication of this "article" have the author's consent as long as the content and intent stay intact.
Article posted with links at heggenhougen.com |
