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

To: mishedlo who wrote (58453)	10/22/2000 12:37:59 PM
From: Bilow	Read Replies (2) \| Respond to of 93625

Hi mishedlo; Re royalties on SDRAM &c... DDR will be the next dominant memory type, and Rambus is saying that they want about 3% to license it. With the DRAM industry at around $30 billion per year, maybe more maybe less, such a royalty would amount to about $1 billion per year. I believe that Rambus has suggested royalties of 4% for RDRAM memory controllers. If they ask for similar amounts for DDR memory controllers, and those memory controllers include any integrated chipsets, then you should take 4% of the CPU market, as integrated CPUs are the inevitable wave of the future. How much is the CPU market? My guess is that the applicable CPU market would be about as big as Intel's current sales, or about another $30 billion per year. Four % of that will provide another $2 billion per year. Total revenues around $3 billion. Make it $2 billion after taxes, and with about 100 million shares outstanding, that brings earnings per share for RMBS to around $20 per share. At a P/E of 20, (since we are assuming here that Rambus has the whole industry, and so grows at a relatively slow rate), that makes RMBS a $400 stock. I know that Zeev computes the numbers lower. But he is ignoring what Rambus management has repeatedly stated about their royalty rates: Under the licensing agreement, the royalty rates for DDR SDRAM and the controllers, which directly interface with DDR SDRAM, are greater than the RDRAM compatible rates. rambus.com In actual fact, it is my belief that the royalty story will unravel not too terribly long after the court cases begin in Europe. Previously Rambus' story was RDRAM, and that has obviously fallen apart. In addition, the company keeps making nonsense statements about their patents. An example is the threat to not license lawsuit losers. It is my expectation that the Rambus story will end with the usual shareholder lawsuits. As an example of the silliness of Rambus getting $3 billion per year for the minor patents they have, note that TXN, which has many thousands of very applicable patents, only brings in $0.5 billion per year in royalties on them: The royalties that Rambus is seeking are not unusual, he says, noting that chip behemoth Texas Instruments Inc., Dallas, generates $125 million a quarter from intellectual property licensing. eb-mag.com -- Carl