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

To: Estephen who wrote (45348)	6/21/2000 10:25:00 AM
From: Steve Lee	Read Replies (2) \| Respond to of 93625

Your conservative target is, by my calculations, too high for fair value. Firstly the chances of charging royalties on this year's entire DRAM production are slim. Secondly, the majority of the DRAM is SDRAM which does not earn 1.5% Thirdly, and most importantly, there is no way RMBS can justify a PE of 70 if it has 100% market share. High PE requires high growth prospects in a fairly valued situation. If they have 100% of the market, they can only grow at the rate of the industry and are always at risk of losing market share to some competing technology. We are currently in a time of DRAM shortage. The dataquest $36 B estimate was made assuming the shortages will get worse. Fabs capacity is increasing and it is likely this shortage will soon disappear, meaning the industry may even shrink in real terms. Sure, Rambus wil grow as they increase market share to somewhere between current levels and 100%. There will also be growth opportunities outside of DRAM, but these are too fuzzy to calculate right now. That aside, I bought RMBS yesterday at 95 3/4 and hope to sell when it is ridiculously overvalued<G>