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Leveraging Cash to Amplify Our PositionThat is the title of the foil on page 7, but is Amplify an appropriate characterization of recent events? Let’s sanity check that statement a little shall we (or should we just move along and head to happy hour and not worry about it)? At the Citi Conference a few days ago, the CFO indicated the Tokenization Business in 2019 had been expected to be in the range of $35 to $40M, but was sold to Visa for $75M but would likely only net about $70M after the bankers and lawyers got their hands out of the piggy bank. In addition, it was disclosed some of the Tokenization customers were holding off making payments but the full costs are still there (until closing - whenever that happens). Today, on the foil on page 39, the Payments & Ticketing Business in 2020 is expected to be in the range of $45 to $50M. That is very respectable GROWTH in my opinion. (Visa is no doubt getting a bargain and is already at happy hour!) At the Citi Conference, and the data shown today on foil 39, Revenue in 2020 from the Northwest Logic acquisition is expected to be approximately $10M while revenue from the Verimatrix acquisition is expected to be about $20M, or $30M in total for the two acquisitions. So Rambus has given up a $45M to $50M growth business in 2020 for two businesses that are expected to generate about $30M in 2020. Is that Amplification? But lets look at the cost of making this (Babe Ruth style) trade. At the Citi Conference, the CFO said the Northwest Logic acquisition cost $30M while the Verimatrix acquisition will cost $65M, or $95M in total for the two companies. Since Rambus expects to net $70M from the Tokenization business sale, minus the $95M cost associated with the trade (not counting other expenses like incentive stock option bonus’s for retention, etc.,), that is a $25M dollar delta! Is that Amplification, or negative Amplification? Oh WTF, … Lets all go to happy hour! |
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