Re: Rambus
Forbes Newsletter Watch
Rambus Man Has His Day
John Dobosz, 01.31.03, 12:04 PM ET
NEW YORK - When the U.S. Court of Appeals for the Federal Circuit in Longview, Wash., overturned a 2001 jury verdict against Rambus on Wednesday, shares of the company skyrocketed from around $7.50 to a close of nearly $12.50 on Thursday. Unfortunately most in the newsletter crowd missed this potential windfall.
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According to Kevin Balfe of the Spear Report, none of the 30 newsletters and 60 model portfolios that Spear tracks had positions in Rambus (nasdaq: RMBS - news - people ) in the last three months. Spear uses a "consensus" system that follows the portfolios of some of the top-performing letters including the Coolcat Explosive Small Cap Growth Stock Report, the Prudent Speculator and Louis Navellier's MPT Review.
One adviser that Spear missed was Fred Hager, editor of Hager Technology Research. Hager is the Swiss-born octogenarian whose high-risk stock-picking style helped him and his followers amass--and then partially lose--a fortune in technology stocks. In a conversation late last year with Forbes, Hager was absolutely convinced that Rambus would overcome its legal woes and rocket higher to $27. Hager was aggressively buying call options at the time on Rambus, and just this week bought more--this time January 2004 calls with a $40 strike price.
The ruling on Wednesday tossed out a fraud conviction against Rambus for withholding information from a chip industry consortium, which adopted Rambus' protocols for memory transfer without knowing Rambus had patents on the technology. Rambus still faces antitrust charges by the Federal Trade Commission and it is the plaintiff in trials in Virginia, Delaware, California and Europe to force memory-chip makers including Micron Technology (nyse: MU - news - people ) and Infineon Technologies (nyse: IFX - news - people ) to pay royalties for using Rambus' technology. Should Rambus prevail in these cases, it could mean hundreds of millions in royalties for the tiny company.
"If the court decision convinces Rambus' three foes to settle and sign SDRAM/DDR license agreements, Rambus' share price could easily go to $100 or more," writes James Rockwell in Hager's letter.
Not so fast, says Manoj Nadkarni, a veteran of the chip industry and editor of Chip Investor. He says that although the decision in the appellate court on Wednesday was certainly a positive for Rambus, it still remains to be seen what the FTC will do with its case and whether a judgement or a settlement will compel the memory-chip companies to pay up. Nadkarni is staying away.
Fred Hager's subscribers have some reason to cheer, but the crusty newsletter veteran will need a few more Rambuses to make up for the last three years in which, according to Hulbert, his portfolios have lost an average 42.9% per year.
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