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Strategies & Market Trends : Steve's Channelling Thread -- Ignore unavailable to you. Want to Upgrade?

To: Suresh who wrote (2675)	6/22/2000 6:21:00 PM
From: anandnvi	Respond to of 30051

I would also like to point out that Zeev assumes earnings from just the DRAM market - granted this is Rambus' biggest market right now, but management has voiced a desire to diversify and have design wins in the network processor area already to their credit. Zeev, would that change your math to a degree or had you already discounted that? Anand

To: Suresh who wrote (2675)	6/22/2000 7:20:00 PM
From: jaall	Respond to of 30051

While the current price may have already factored in all the DRAM royalties in the near future, my big question is what is Rambus going to do with all their cash, credibility, and connections. I have confidence that they will do good things with these resources.

To: Suresh who wrote (2675)	6/22/2000 7:43:00 PM
From: Zeev Hed	Read Replies (4) \| Respond to of 30051

Suresh, please differentiate between what I think a stock will do and what might be fair valuation. this $5/share is really only $4/share since RMBS will continue marketing support and R&D and that should account for 20% of revenues. Of this $4/share the various governments (Fed, State) take about 45% (I have seen many companies with smart accountants getting down to 35%, but mostly because of heavy depreciation charges and R&D tax benefits), so assume 40% tax rate, that leaves you with "peak earnings" of $2.40/share (on your $50 Billions of DRAM). Let's assume, however, that DRAM will be 60% of all earnings (as per Tate's most recent pronouncements), and you get back to $4/share peak earnings. I think that a fair valuation on this is about $100/share. So, why am I bullish on RMBS? Because it now has momentum and shorts to fuel it to overvaluation. At the current $140, I believe that a lot of the good news (the whole dram industry pays royalties, what more is there?) is discounted, and we should brace ourselves not to ride this "too long", since once the semi cycle turns, DRAM sales may actually decline and with them the forecasts of future royalties. One of the forecasts from the most optimistic people is that by 2004 DRAM will already be declining and annual sales would get back under 60 Billions (from what they believe will be an annual peak of $75 Billions). Zeev