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

To: cordob who wrote (74993)	6/27/2001 12:17:09 PM
From: wily	Respond to of 93625

cordob, Thanks VERY MUCH for the correction. Thanks also for the link to your spreadsheet -- I'll try to unravel the info there when I get some time. You're right about the net margins -- the 75% number should be BEFORE TAX, whereas I didn't even include tax in my calculations. And the 75% number is perhaps even still high. Still using the 75% number for net margins, and using a tax rate of 35%, RDRAM royalties = $98MM for 2002: Rambus profits = 98MM * .75 * .65 Rambus profits = $47.8MM Rambus earnings = $.478/share Rambus stock price = 25 * .478 Rambus stock price = $11.95 (end of year target) That's the optimistic scenario. A more pessimistic view would be (changes are: 60% net margin rather than 75%; 25% price premium to SDRAM rather than 50%; PE=17 rather than 25): -60% net margin (before taxes) -100MM shares outstanding -PE = 17 (reflecting a 17% CAGR in RDRAM $ sales) -DRAM market in 2002 will be $20B (WAG) -2% royalties on RDRAM -no royalties for SDRAM or DDR -RDRAM price will be on average 25% higher than SDRAM for 2002 -18% units would would translate to 21.5% by $ RDRAM royalties = .02 * .215 * $20,000MM RDRAM royalties = $86MM Rambus profits = 86MM * .60 * .65 Rambus profits = 33.54$MM Earnings/share = $.3354 RMBS stock price = 17 * .3354 RMBS stock price = $5.70 (end of year target)