Hi Web Myst; Ah, so you're just looking for the DCB. That's what Zeev is doing, he knows nothing about memory, and he has a pretty good record of making money on RMBS to the long side so I wouldn't worry too much. But Zeev does keep very tight stops on things. I'm guessing that if RMBS gets to the point where you can see the whites of the eyes of the $6 trades, Zeev will take his (small) loss.
As far as the Rambus story goes for long term investors, there are two different stories, which is what I was asking you about.
There's the growth of RDRAM story, and that's my specialty. Until early 2000, Wall Street's story for Rambus was the support of Intel forcing RDRAM onto the market. Those of us who are more familiar with the memory industry could smell blood in mid 1999, and by late 1999 it was obvious that RDRAM was going to be stuck to niche status. That wasn't obvious to Wall Street until mid 2000, and by that time the other story had taken over, that Rambus would collect high royalties on all memory types.
To the memory designers, it was obvious that RDRAM wasn't going to make it as soon as the Camino launch started being delayed. But for Wall Street, which doesn't have the intuitive connection to memory, the clue was the total absence of any other design wins other than Intel (and Sony). In late 1999, Nvidia started ripping market share out of the rest of the graphics market with their DDR solutions. Up till that point, RDRAM had been commonly used in graphics cards. But when every graphics house began announcing DDR boards and dumped their RDRAM based boards, it started becoming clearer to Wall Street. The other clue was the absence of chipset support for RDRAM from AMD and the many chipset manufacturers like VIA, ALi, ServerWorks, SiS, etc. And the last nail in the coffin for RDRAM as a mainstream memory was Intel's announcement of eventual DDR support for the P4, and also Intel's exec saying that Rambus was a "mistake". By that time, the hope that RDRAM would become pervasive was gone from Wall Street, but the Rambus had gotten several memory makers to sign up for royalties so the stock stayed high. Since mid 2000, the news for RDRAM continues to be very poor. The P4 was late, and volumes were well under what Intel had predicted. Everyone was waiting for the SDRAM and DDR versions of the P4. Intel had to drop the prices on P4s to historically low levels, (for the amount of silicon and freshness of the design), and even subsidize RIMM prices. Meanwhile, DDR boards started showing up from AMD and others, and these didn't prove to have the unreliability (at least in the memory interface) that Rambus had predicted. When Compaq and Hp started selling DDR based computers, all taint of DDR as an unreliable memory technology had to dissolve (except with the Rambus faithful).
So Edelstone and others predicted that Rambus would be highly profitable due to their patent portfolio covering SDRAM and DDR.
Then, on March 15th, Judge Payne in the Rambus v. Infineon case gave a Markman ruling that essentially decided that SDRAM and DDR did not infringe on RDRAM. This decision was widely described in the trade press in exactly that way, but Rambus put out press releases saying that they would prove their case even with the brutal Markman decision. But Wall Street wasn't so sure, and the stock dropped.
Eventually Rambus lost the case entirely, and even got convicted of fraud. You have to remember that this case was chosen by Rambus as the best way they had of proving that SDRAM and DDR used their IP. In history, the number of companies that get convicted of fraud after suing another company for royalties is somewhere very close to one, and that one is Rambus. With that ruling, there was no way that Wall Street could possibly get involved with this stock.
Let me put it this way. Rambus was not an earnings stock, there never were high earnings (compared to the stock price) in RMBS. Instead, Rambus was always a story stock, and when their first story failed, they migrated to a new story. There is no way that Wall Street is going to pony up to see what the third story that Rambus is going to come up with.
Suppose you've got a trader for a mutual fund. He buys RMBS. If he makes money, great, but if he loses money, what will management do to him? The company's just been convicted of fraud, fraud in the collection of what is now the majority of their royalties, and this after their management repeatedly, publicly stated that they had the patents. The end result, there are plenty of stocks to buy out there where no one will second guess your loss, but Rambus isn't one of them. That's what's keeping institutional investors out of Rambus.
Rambus' main attraction is their great story. But the "great technology" story was broken by the combination of the Camino fiasco, the continuing high prices of RDRAM, and Intel's backing away. Similarly, the "great IP" story was broken by the courtroom losses. At this point, I wouldn't be surprised to see RMBS trade below $2 per share, and that's before the expected RMBS market share losses and the expected further courtroom losses.
One thing about Rambus investors is that they are very vocal, and a bit of a collection of nut cases. You've seen the posts by Rambus longs here and on the other Rambus threads. Imagine what the mail of that guy who wrote the Fortune article must be like. That bad attitude towards Rambus now present in the mainstream financial press was present long before in the (electronics) trade press, and I'll bet the quality of the e-mails that Rambus losers are sending in to the Fortune author are just like the garbage and half truths they post on this thread. Here's a good link for what the trade press thinks about Rambus investors:
e-insite.net
As far as comparing RMBS to another stock, my choice would AENG. Advanced Engine Technology was a story IP stock. The story was that they had an improved internal combustion engine (ICE) design that would make the investors wealthy. As usual, the DA investors didn't think to wonder why they were being given the opportunity to buy in rather than the firm simply remaining private until they had gotten the royalty stream on line. This is identical the to the Rambus story, why did Rambus management bring the company public, they didn't need the money.
AENG had some big names signed on as early investors, names that every race car fanantic in the country would recognize. (I.e. Carroll Shelby, of the Shelby Cobra.) That's similar to the Rambus story, or maybe a bit better, as all Rambus had were a couple of Stanford professors.
AENG gave a simple to understand reason why their engines were better: "The OX2 Engine having less than thirty parts with only three major moving parts was hailed by those present as the first real breakthrough in internal combustion engine design since the introduction of the Otto Four Cycle Engine some One Hundred and Thirty years ago."
AENG gave demonstrations where their engines produces more horsepower per pound than any modern car engine. This advantage was supposed to be so attractive that the car makers would be forced to sign up for high royalties.
The amazing thing is that while everything the AENG people said about their technology was true, they never got the thing into production. The problem was a subtle engineering problem, one understood only by automotive engine designers. This is similar to the problem with Rambus, that the weaknesses of its technology are not well understood except by memory design engineers. So in both cases, mom and pop were sucked in by the press release.
Unfortunately, AENG never got GM to sign up to make nothing but OX2 engines for their 2004 production, LOL! The AENG thread on SI is now dead, as is the stock, more or less. I don't know jack about engine technology, but I followed the AENG story, and collected up a set of links to the story and to posts from the engineers who explained why AENG was a bad idea here: #reply-12453797 If you like researching stocks, go to the above link and click through the dozen or so links, the AENG story is fascinating.
Of course both cases largely consisted of the company insiders dumping shares to the public. At this time, AENG is trading around $.80 per share, and it sure looks like Shelby is buying shares. (Check it out on Yahoo, I bet it's more likely to bounce than RMBS.)
-- Carl |
