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

To: pompsander who wrote (87430)	12/22/2003 8:21:24 PM
From: Rich1	Respond to of 93625

Only a matter of time IMHO...

To: pompsander who wrote (87430)	12/22/2003 9:18:03 PM
From: Bilow	Read Replies (1) \| Respond to of 93625

Hi pompsander; There are still several hurdles before Rambus can collect lots of royalties. (1) They have to avoid getting tagged by the FTC. The FTC just postponed making the decision for another 2 months. This is what everybody is worried about, but it's only the tip of the iceberg. (2) They have to avoid getting nailed for failing to inform the JEDEC members that they were intending on collecting royalties. This is part of the subject of the Virginia trial, which is stayed. Note that the CAFC judges did fault Rambus severely for lack of ethics. (3) They have to prove that their patents (the ones that apply to SDRAM or DDR) are not invalid, especially with respect to prior art. This subject hasn't been litigated in the US. In Europe, they lost and are appealing, but there are differences between how its done here and there. (4) They have to show that the fair value of their patents gives a royalty amount that makes this whole thing worthwhile. In other words, if they win royalties, but the royalties are equal to those typically used in the DRAM industry, then the stock price crashes. (5) They have to avoid ending up having their winnings in the USA cancelled by losing in lawsuits against them in other parts of the world, particularly in Europe and Taiwan. That's a fairly long list of hurdles. And their resolution will take many years. Rambus' RDRAM technology is now dead, and their other stuff doesn't seem to generate much comment so I would guess that most people have realized that the parts of it that are not dead no longer have much chance of becoming very lucrative. For this reason, the stock price is going to follow the legal proceedings closely. They're earning about 5 cents per share per quarter, last time I looked. At the current P/E, they're rather speculative and I wouldn't get near them as a long. Still, I wouldn't go about shorting them, which is a position I've always held (see #reply-18281755 for example). The stock is very volatile, it has a following of "true believers" (people who are not well connected to reality), and a management with a marked tendency to withhold information from the public if that information is detrimental to their stock price. Until the next legal news, I'd expect RMBS to follow the chip stocks, but with higher somewhat higher volatility due to the slow grind of legal news. A good comparison is between INTC and RMBS, as both are chip stocks. You can see the day to day tracking in this price chart, but also the influence of news on RMBS: finance.yahoo.com As far as figuring out what the price of RMBS should be if they do win all their lawsuits, simply note that they are already collecting royalties from something like 30% of the industry, and yet they only earn about 5 cents. Even assuming that they don't have any expenses (other than taxes) on the increase in royalties, the stock is still going to be earning far less than a dollar a share. And since the memory market is already a fully mature market, they have little real prospect for growth. For this reason, I don't think that RMBS is a great value at this price even assuming they win. -- Carl