To: rrufff who wrote (87310 ) 12/6/2003 12:35:21 PM From: Zeev Hed Read Replies (2) | Respond to rruff, I believe it is important to look at the bu$$ both from a technical point of view and from a fundamental point of view. The later should include guesstimates as to what valuations the market may set on this company under different scenarios of legal outcomes. From a technical point of view, as I stated here (#reply-19545865), there is a lot of resistance in the $33/$34 area (and indeed, we got stopped dead just above $32. From a fundamental point of view, there is an outside chance that indeed SDRAM, DDR as well as RMBS will be royalties bearing, that is essentially the whole DRAM market. The size of this market is a moving target between I would say $20 B to $30 annually. Take the mid point of $25 B and a royalty rate of let say 2% and you get $500 MM revenues, which should yield some $300 MM after tax profits (not much expenses taken here, maybe $50 MM annually and a 35% tax rate). That is $3/share which at a PE of 25 would yield $75/share. Of course, Mr. market has a tendency to become over exuberant and will start and blow "expected market" to the $50 B range and royalties rates to 3% and a stratospheric PE and result once more with a stock north of $100, if and when the legal issues are settled in favor of the bu$$. Until then, sure you can short, but I would have a hard stop at $34, and really would not expect a retrench much under $25/$26.5. If a bad court decision comes down the pike, then who knows how low it can go, there are supports in the $24/$25 area, and then in the $21 area and if that is taken out, it could really turn bad. Right now I do not expect such, so I would look elsewhere for fruitful shorts.
