Second, there is the question of just what it is that an MOU gets you. An MOU is (literally) a “Memorandum of Understanding.” It is not an agreement and is almost never enforceable. Similar past “understandings”, friendships, and hopes of cooperation had added little or nothing to Rambus revenues or the Rambus bottom line. Cadence (July, 2004), Infineon (March, 2005), AMD (December, 2005), and Intel (November, 2007) all come to mind. Perhaps Rambus now has reason to believe that it now has a more reliable partner. But history (with Samsung itself, and with other “longer-term relationships”) calls this into question.
It might be (we do not know for sure) that the MOU with Samsung has – contrary to convention -- some teeth in it, making it enforceable. That seems unlikely, however, particularly given that Rambuis has (now given many opportunities) said nothing along these lines. Also, per the 8-K, Rambus’ releases of its litigation claims against Samsung become effective immediately upon the completion of Samsung’s $200 million in upfront cash payments (which will be made this year.) Those Rambus litigation claims, once released, will thus provide no leverage for further compliance with the MOU – even if (as seems unlikely) it is enforceable.
It also seems highly unlikely that Samsung will be highly incentivized (as some hope) by its purchase of $200 million worth of Rambus stock. This deal term (while diluting Rambus shareholders significantly and effectively providing a voting block to managment) feels like it is (to a significant extent) window dressing – helping Rambus to reach the claimed “$900 million victory.” Samsung can sell the stock in eighteen months. Half the stock is covered by a put, with which Samsung can (in eighteen months) recover the same price it paid Rambus. And, in any event, the downside risk or upside opportunity for Samsung in Rambus stock feels, frankly, like a negligible incentive to a company that reports 2008 shareholder equity of $90 billion, with over $3 billion dollars in reported profits last quarter.
Thanks for your thoughts and insights.
Unfortunately, I must confess that I am one of those shareholders hoping the Samsung investment (i.e. the ownership of Rambus shares) will incentivize Samsung to competitively build, promote, and price Rambus products. Because in my opinion, without that ownership in Rambus, I fail to believe Samsung will be properly incentivized by this settlement agreement, and I completely agree with you that there is very little historical evidence to suggest that Samsung will live up to any MOU, especially if it is not enforceable per the license agreement, which apparently it is not.
Therefore, in my opinion, the more shares of RMBS that Samsung owns, the better (assuming Samsung purchases those new shares at market value), which is why I was very disappointed to read in the (sparse) 8K filing that Samsung was prevented from buying any more shares.
But despite Rambus’s previous licensing debacle with AMD, which failed to comprehend the purchase of ATI, which has no doubt contributed to Nvidia’s resistance to license, I find it especially comforting to see that Rambus management is now thinking about the little things. Like securing the voting rights of the Samsung shares, so that Rambus management can vote for their own nominations and compensation.