Is RMBS still up for sale? No mention on the Jan 29 CC. eom | RMBS Message Board Posts

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Msg  772237 of 777414  at  2/13/2018 4:58:57 PM  by

stkhawk


 In response to msg 772197 by  ibm604
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Re: Is RMBS still up for sale? No mention on the Jan 29 CC. eom

I am not sure Rambus was ever up for sale.

As I recall, last summer (as the stock price was headed down into the 11’s), an unconfirmed rumor surfaced suggesting that Rambus was working with a financial adviser to evaluate a possible sale. That rumor no doubt helped to reverse the stock price decline, but was the rumor real?

https://www.bloomberg.com/news/articles/2017-07-07/chip-firm-rambus-is-said-to-work-with-adviser-on-potential-sale

https://www.bizjournals.com/sanjose/news/2017/07/10/rambus-rmbs-exploring-possible-sale.html

When questioned about this rumor at the earnings conference call, as I recall Rambus management declined to comment.

In any event, assuming there was really a financial adviser hired to explore a possible sale, one has to wonder what conclusion they reached?

In my opinion, the Revenue Breakdown foil on page 17 (from the last earnings conference call) sheds a lot of light into this hypothetical question.

http://s22.q4cdn.com/909968316/files/doc_financials/2017/q4/Rambus_-Q4-EarningsCallWebcastFINAL.pdf

Starting off with RLD, the picture is quite ugly in my opinion. Royalty revenue from 2016 to 2017 shrank over 50%, with product revenue growing slightly in 2017, but contract revenue also shrank by nearly 50%. Given the recent news that Rambus was unable to re-signed their largest customer, along with significant head count and overhead of RLD, who would be interested in acquiring this business other than in some form at a fire sale? In my opinion, the vast majority of potential buyers of Rambus would likely have no interest at all in acquiring RLD in a purchase of Rambus

Aside from the revenue from the DRAM annuity where Rambus still gets the bulk of their revenue, the security division (RSD) obviously represents Rambus’s most attractive business (in terms of a possible acquisition). In my opinion, there are three major revenue pieces of the security business. One, the legacy revenue from the Kocher acquisition (DPA licensing, etc). Two,  CryptoManager and Three, Ticketing and HCE.

The Revenue Breakdown foil does not break out these revenue pieces specifically but my guess is the most attractive growth is currently coming from the Ticketing and HCE piece.   To date, I have not seen any evidence of significant CryptoManager down stream revenue materializing from CryptoManager core usage. In short, RSD is currently a $100M/yr business, with hopefully continued growth potential.

Besides RLD being unattractive in acquistion, I also wonder if the Data Buffer Business (currently hidden within MID) would help or hinder a possible sale of Rambus? Given the Data Buffer business generated approximately $21M in 2017, my guess is that business is still currently operating at a loss.  If Rambus hits their upper goal of $40M in 2018, will that finally be accretive or will this business not become accretive until DDR5 enters the server market (sometime in 2020 or beyond)?

In my opinion, those are the types of questions any potential advisor of Rambus will be asking (assuming there was ever a financial adviser hired to evaluate a possible sale). At a minimum, dumping RLD from the books will certainly help to make Rambus more attractive for any potential acquisition.

My guess is the Data Buffer business is also not helping in terms of a potential acquisition.
 


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Replies
Msg # Subject Author Recs Date Posted
772240 Re: Is RMBS still up for sale? No mention on the Jan 29 CC. eom temvik 0 2/13/2018 7:48:12 PM
772241 Re: Is RMBS still up for sale? No mention on the Jan 29 CC. eom temvik 0 2/13/2018 8:39:00 PM


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