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?
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.
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.