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

To: jim kelley who wrote (39021)	3/29/2000 9:31:00 AM
From: dpk	Respond to of 93625

Yes, I am aware of the limitations of P/E based valuations and I agree with you that the NPV of free cash flow is the best approach for valuing companies. However, in RMBS' case, there is not much visibility for cash flows beyond the next couple of generations of RDRAM. This does not imply that they will not be generating cash then (as they well might with new inventions/applications), only that I don't have much visibility about what those cash flows are likely to be. The P/E approach is just a simple way to estimate a lower bound. I am also aware that controller chip royalties are greater than the 1.5% I used for the memory chip calculation, but I believe, on a relative basis their contribution will be much smaller than that from DRAM chips and I wanted the estimate to be somewhat conservative. Yes, I was simply trying to calculate a conservative valuation for the stock price assuming RMBDS and Intel execute per announced/implied plans over the next three years. dpk