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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: tekboy who wrote (26697)	6/23/2000 1:24:00 AM
From: Mihaela	Respond to of 54805

Tekboy, --what is the ultimate size of the market for Rambus-royalty chips? ~38 billion in 2001 --what royalty rates is Rambus likely to get? Just some estimates. The royalty rates of each company deal are confidential. 1% for SDRAM 1.5% for RDRAM 2% for DDR SDRAM 3%-5% for memory controllers Mihaela

To: tekboy who wrote (26697)	6/23/2000 2:49:00 PM
From: FLSTF97	Read Replies (1) \| Respond to of 54805

RMBS Although I think the recent capitulations by the Japanese DRAM manufacturers increases RMBS's claim to gorilla status, I still belong the Mike Buckley school in that I don't believe that "gorillas are never overvalued". Let's take the year 2001 total DRAM market of $38 Bil at face value. I've seen royalty rate references ranging from 1-5% so let's take 3% as a median. That means 100% market share give RMBS revenues of S1.14 bil so with the current market cap of $11 bil it is about 10X sales. At that point who knows what OI they would have but let's project a pretax net margin of 90% which would give roughly $1 bil in pretax profit. I'll assume they have great accountants and only pay 32% taxes which gives final earnings of $680 mil. That means that an $11 bil investment(total market cap) returns 6.2%. This of course assumes no further growth in the memory market which is unfair. Traditionally this market has a CAGR of about 15% and I haven't seen any hockey stick projections (yet!) for future DRAM total market growth in $. Ignoring any time value adjustments that means in 2002 I'd get 7.8% and in 2003 I'd get 9%. The average of these is rather close to the current risk free interest rate one could expect. IMO too close. While I can't quite claim that RMBS is overvalued if one assumes it is risk free, I think you can argue that it is fully valued. I think a reasonable person would question the assumption that RMBS is risk free. I do, but I've been told before that I am unreasonable! FATBOY