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

To: pompsander who wrote (16768)	2/27/1999 11:06:00 AM
From: MileHigh	Read Replies (3) \| Respond to of 93625

From Barron's Interview: Q: How about Rambus? Kukacka: The stock is very controversial right now. It traded at 61 recently, down from a high of 85. But over a two-year time frame, it will be very exciting. Despite the volatility, the risk/reward is very favorable. Intel needs these guys. What does Rambus have? It's a designer/licenser of a new chip-to-chip technology that fits between the memory part of a DRAM chip and the micro-processor. Intel has been very effective at creating microprocessing technology for more speed and bandwidth, to deal with more video and data. The DRAM hasn't kept pace with the speed side. If the DRAM can't keep up, Intel's Pentium 300- or 600- megahertz chip won't make a difference. Enter Rambus, which has solved what the investment community terms "the memory bandwidth gap." Intel endorsed these guys as the new industry standard to resolve the speed issue between DRAM memory and microprocessing. Intel committed in full to make Rambus the new platform for all their PC- based technologies starting in late '99. Q: What's the hitch? Kukacka: There are a lot of stories floating around that the new chip from Intel to support the Rambus DRAMs will be delayed to the year 2000 from the third quarter of '99. And there's also been talk that maybe Rambus won't be the standard. But let's look at the numbers. Intel is on board. Eight out of 10 of the largest DRAM producers have all said, "Okay, this is the way we are going to go. If Intel wants it, we have to produce DRAM with this platform embedded in." It's just a question of what the ramp will look like, and if it will be September, October, December or January. If we look at the commitment Intel and others have made to this technology, this product should have at least 70% market penetration by 2001. Q: What kind of earnings do you see? Kukacka: Assuming a $30 billion or so DRAM market, and 60%-70% of that going into PCs (for which this is a perfect product), you have Rambus earning in excess of $4 or $5 a share by 2002, conservatively. This year, Rambus will earn something like 35 cents. This is a licensing company. It owns only the technology. It has no fabs or people. It has a 100% gross margin, and it will coin money when Intel launches those chips. So take the $4 earnings figure, put a 30 or 40 multiple on it, and you can see that the stock could double from here. And the downside, if there's another delay, is 60.