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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: unclewest who wrote (26151)	8/1/1999 5:46:00 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 93625

Uncle, I have a simple way to do comparative market valuation for RMBS. Lets look at the whole DRAM market, MU claim that it is or will be 20% of that market now or soon. Under the best circumstances, I see it difficult for MU do bring to the bottom line more than 8.5% of their sales (some will even say they'll have problems painting this line black). Well, lets use MU as a surrogate for the DRAM market, and adjust valuations accordingly, MU capitalization is $16 Billion, you multiply this by 5 since MU is only going to be 20% of said market, and divide by 5 since RMBS is only going to bring down 1.7%, you also divide this number again by 2 to allow for taxes, and guess what you get an "MU adjusted" fair value capitalization (assuming RMBS does nothing but DRAM) of $8 billions, about four times what RMBS is selling for right now. QED. If you want to assume that RMBS will never be more than 50% of DRAM, you take another factor of 2 and end up with a superconservative "MU adjusted value", nothing but "DRAM RMBS valuation" which is twice current valuation, or about $180/share fair current valuation. As I "by stander" I would bet on RMBS rather than MU, for the simple reason that whether MU or the other DRM manufacturers bring any black ink from time to time to their bottom line is irrelevant, RMBS always gets their cut, without investing in bricks, mortar and multibillion bucks foundries, or even having to worry about outdated inventories and other bothersome little details a manufacturer needs to address. Having said all that, the current technical picture is negative and I believe that the $86-$88 area will be challenged and possibly breached. Zeev

To: unclewest who wrote (26151)	8/1/1999 7:48:00 PM
From: MileHigh	Read Replies (1) \| Respond to of 93625

Yes, I meant '01, next year = '00 = EPS estimate of $0.77, therefore the next year = '01, which you say = $11.00 EPS. When you say you are discussing 01/02, which is it, 01 or 02? Just curious.... TIA, MileHigh

To: unclewest who wrote (26151)	8/1/1999 9:49:00 PM
From: Jdaasoc	Read Replies (1) \| Respond to of 93625

Unclewest: The way I see it. My analogy of what RMBS will look like is an insurance company. You will extensive cash reserves with RMBS earning interest like an insurance co. You can equivalence royalties percentage earned with single digit profit margins in insurance business. Let's assume that RMBS is wildly successful. Royalties rise from $10M in 1999 to $200 M in 2009 in a linear fashion. However, earnings plateau at that level and start to trail off as newer technologies and patents expire. What will we have RE RMBS. Let's see: They take in $1 B in royalties over 10 yrs. less expenses and taxes leaving about $500 M in cash earned over 10 yrs.; add in $60 M on books in 99; plus $70 M for accrued interest on invested cash and remaining contract revenue to be earned. The grand total is $ 630 M or approx $21 book value(assume 30 M shares outstanding in 2009; MANAGEMENT will not work for salary only). That $21 book value will generate $ 1.05/sh @ 5% plus $3.33/sh in net royalty income or $4.28/sh. Since it will not be a hi earnings growth business model, let's give it a P/E 30. I see RMBS stock price as $129 in 2009. If you can forsee a higher plateau level of royalties or extention of patents beyond 2010, then RMBS stock should be valued higher in 2009. jd