|
|
|
|
||
Research Note from BWS on 7/15Not sure if anyone posted this yet, but here's a snippet from the note: >>Rambus (RMBS- Buy Rating), after making their argument for an injunction to stop Hynix Semiconductor from selling memory chips that infringe upon their US patents, is in a period of wait and see. Judge Ronald Whyte has yet to announce his ruling on the matter, and the wait has generated a swirl of rumors in the last few days causing RMBS shares to decline in value with the general market. We have highlighted in the past the sensitivity the shares have to rumors and now is a crucial moment for the Company. The current phase of the trial against Hynix is pivotal for RMBS. It could be the turning point in being able to seek some sort of settlement with Hynix and other reluctant memory manufactures. RMBS shares have declined in recent days to levels where we believe have created an attractive buying opportunity. RMBS won all three phases of the trial against Hynix and moved to bar the Company from importing products into the US. The strategy has been one used by multiple companies in patent cases in recent years as a negotiating tool. The injunction was granted in many of the cases and led to settlement talks. We strongly believe Judge Whyte could follow the precedence set by other cases and allow for the injunction. Hynix could appeal the injunction, but it becomes an uphill battle for Hynix after such an event. Furthermore, remaining to be cleared up is the matter of damages owed to RMBS. The jury had awarded damages to RMBS of approximately $130 million related to owed royalties up to the end of 2005. The remaining damages have yet to be handed down by Judge Whyte. In short order these issues should be addressed providing some clarity as to where RMBS stands. RMBS is also seeking a summary judgment against Micron Technology (MU- No Rating), Nanya Technology, and Samsung Electronics (SSNLF- No Rating). A summary judgment would expedite the trial process and provide RMBS a victory against the Companies. RMBS does have the possibility of winning a full summary judgment based upon the similarities of the trials between Hynix and these three memory manufactures. The memory manufactures already lost one phase in the consolidation trial earlier this year. Investors should not be putting too much weight on RMBS being able to gain a full summary judgment, but we did want to highlight that there is a chance. There has been much stubbornness to settle the matter, which is a point we believe Judge Whyte has found to be the most troubling in these cases. Unless there is a clear outcome by the ruling to be made by Judge Whyte these cases could continue for another few more years. The lawsuit brought against NVIDIA (NVDA- No Rating) shows further opportunities for RMBS to seek licensing arrangements. The case against NVDA comes at a time when RMBS has been winning phases of their trials and could put NVDA in a tough spot. RMBS is pursuing the lawsuit on grounds of their graphics technology patents. NVDA uses memory in their graphic cards, which RMBS claims to be infringing on patents issued to them. NVDA could use the same path as other memory manufactures, but RMBS patents have been said to be valid in other court cases and by the FTC. We believe the road bump in this case came from the delays in the matter against Hynix. If there is a case that could be settled quickly it is the one against NVDA, depending on what happens in the Hynix trial. The wait and see approach seems to be playing mind games in the market causing the shares to become highly sensitive once again. We have stated in the past how the revenue generating side of the RMBS has expanded to a level where it could reduce the risks from the legal matters. Nonetheless, RMBS shares are likely to continue to be volatile during this wait and see period for the ruling from Judge Whyte. RMBS should report second quarter results before the end of July, which could provide some more color on the pending decision and the NVDA case. We find RMBS shares to be attractive given the risk/reward aspect. On the downside RMBS shares could move to $14 to $15, while on the upside we think RMBS shares could trade north of $22 on a partial victory, and above $25 if a fully summary judgment is received along with the injunction. A ruling from Judge Whyte could come any day, and we would think more likely to happen in the next few weeks. Risk to Price Target Our price target assumes that RMBS business would continue as normal with royalty revenue generation without developments from the Company’s legal cases. We assume that RMBS would see rising demand for their patented technologies providing a basis for revenue growth over the next several years. If the Company was to lose a licensing renewal RMBS shares could be impacted negatively. << |
return to message board, top of board |
Msg # | Subject | Author | Recs | Date Posted |
241252 | Re: Research Note from BWS on 7/15 | mutualhelper | 5 | 7/19/2008 1:57:04 PM |