3 Reasons to Sell Rambus Today

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The turmoil in the markets makes it too easy to justify selling any stock these days. Yet while panic never helps investors, it's still a good idea to play devil's advocate with investments.

Consider memory technology developer Rambus (Nasdaq: RMBS). Though demand for better and faster memory interfaces will never go away, more than a few of the 502 Motley Fool CAPS members weighing in on the company are offering reasons to be bearish.

Here at The Motley Fool, we like to consider both the good and the bad sides of an investment. Below, I've highlighted three of the main bearish arguments on Rambus. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Rambus in CAPS.                                              

1. Losses
While other companies such as SanDisk (Nasdaq: SNDK) ended up in the black in their recent quarters, turning a profit has been difficult for Rambus in recent years. Its third-quarter results still show the effects of the downturn, with revenue down 5.3% year over year and another quarterly loss. And analysts expect the losses to continue next quarter and next year.

2. Costly legal hassles
Rambus owns a list of patents, as do Qualcomm (Nasdaq: QCOM) and Tessera Technologies, and enforcing those patents can be costly. Rambus has been wrapped up in legal disputes with Micron Technology (NYSE: MU) and NVIDIA (Nasdaq: NVDA), and has racked up millions in litigation expenses. Regardless of the outcome of the disputes, Rambus shares often experience excessive volatility based on rumors. Some CAPS members say they believe it's just not worth the hassle.

3. Coattails can be slippery
Rambus' top five licensees accounted for about 79% of its revenue in the third quarter, while each accounted for 10% or more of its total revenue. Having a high degree of customer concentration can carry additional risk, leaving the company highly dependent on the business of its top customers. For instance, STEC's (Nasdaq: STEC) shares recently suffered an extreme market reaction when the company said its key customer EMC (NYSE: EMC) would carry over inventory into next year.

To see details of what CAPS members are saying now about Rambus, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts in the comments box below.