Here's another viewpoint, FYI.
It is from an unnamed writer for E*Trade's "Marketwatch", in a column he wrote today covering several stocks.
"Rambus rumble: If I've learned nothing else in more than 30 years of business reporting it's never to try to predict with certainty the outcome of a court case or figure out what possible damages will be -- or what they'll be worth to investors. Yet the stock of Rambus (RMBS, Trade) has sprung back to life in the wake of a judge's refusal to toss out a plea by Hynix Semiconductor to kill Rambus's patent-infringement case against Hynix (HXSCF, Trade). The trial starts in early March.
The real boost in shares, however, came after W.R. Hambrecht analyst Daniel Amir used the court's action as a reason to raise Rambus to a buy from a hold, saying he believed positive rulings in the patent case and a price-fixing case could lead to $936 million in settlement-related revenue to Rambus.
Sounds good on paper, but: In the same report Amir concedes that his analysis on the amount of Rambus's winnings could be similar to the results of its case against Infineon Technologies (IFX, Trade), which was "much less than our forecasts." Furthermore, he applies a multiple of three-times sales to his settlement estimate. Yet it could be argued that a legal settlement is a one-time event and, as such, should get a multiple of one.
One bear on the stock believes that, on its business merits, Rambus is worth around $10 per share -- as does Amir. Add the settlement, at one-times the nearly $1 billion, and you get another $9. With the stock at $35, boosted even further by the company's announcement Monday of an additional stock buyback, the short says: "If they win, you make 40%; if they lose you make 70%." Or, viewed from an investor's perspective: If they win, and investors get sober in their valuation of the settlement, the stock could call 40%; if they lose, it could fall 70%.
All of that depends, of course, on what Wall Street wants to do with the stock between here and there. This could very well be a classic case of buy on the rumor and sell on the news. That's another way of saying there are likely to be classic Rambus rallies between here and there. But do take note: Among the big sellers into the recent rise, via the exercise of options, are Rambus insiders."
Again, just another viewpoint. Knowledge is power.
Gary B.
AI
