Post of the Day
June 20, 2000

Board Name:
Rambus

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Subject:  The Fool Misses the Point Again
Author:  jasonxsmith

Well, here we are a day after the big news, the watershed event. Oh, and the second big news, the second watershed event. Rambus is big news everywhere...except, that is, for the Fool.

Yep, Oracle, AOL, and Intel make the big headlines. Rambus is overlooked. We didn't even make the "Quick-News." I guess 47% followed by 10% AFTER a 300% climb is not that newsworthy. And we still have a way to go to get back to the all time high! Geesh, what's a stock gotta do around here to get noticed?

Maybe we could appeal to the Rule Maker crowd. They are heavy into Intel, as am I. Maybe they would want the darling of Intel to get a bit more press around here. If you are invested in Intel and you don't think you already have a big stake in Rambus, you need to get back into mutual funds.

We don't fit well with the Rule Breaker crowd. I do not believe that Rambus is a "breaker." It may be a Gorilla, but there is a BIG difference. Rambus is entering into a mature industry, not a developing one, and they have an evolutionary technology, not a revolutionary one. At this point, Rambus is a lot less risky an investment than a true "breaker." Of course, there is a difference between actual risk and perceived risk, and the perceived risk is still pretty high. Watch it drop, though, as other MMs sign licenses to use Rambus IP.

Rambus isn't a Rule maker either. It's not big enough yet. You have to wait until companies are big and stodgy before you can consider them a "Maker." There is still too much "risk" in Rambus to be a "Maker" stock. A lot of the numbers are there, of course, but the company is not easy to categorize, is it?

Still, Rambus is going to make lots and lots of money, growing at 93% over the next 5 years according to the analysts. Let me repeat that, in case you missed it: 93%, 5 years. That is 26,779% in 5 years. And you know what, most of that is going to happen in the next 3 years. The growth will be front loaded!

And Rambus is actually going to make money! Where else can you get 93% growth in a company that is expected to have a 50%+ profit margin on sales of $800 million? Last I heard, Amazon.COM was still losing money, as are a lot of the upstart .COM companies. I just have to ask WHY ISN'T EVERYONE STANDING UP AND TAKING NOTICE? Why isn't this huge news?

And assuming that the memory industry does not dry up, and Hitachi doesn't suddenly come up with a miracle defense that invalidates every last Rambus patent on the books, the revenue is virtually GUARANTEED! Rambus has no competition. There is no memory technology on the near horizon that threatens them, and they should be able to collect royalties on virtually every piece of DRAM manufactured anywhere in the world.

And the technology applies to other applications in other areas, applications in emerging industries that may grow to be much larger than the DRAM industry. We just don't know how big these other things are going to be, but since Rambus is really, really undervalued right now assuming revenues of $800 million a few years down the road, I don't really care. I'll care more when the stock hits $200.

Isn't there some place on The Fool for us to fit in? I feel like such an outcast. Isn't the most important thing, after all, picking great stocks, not following some pre-set guidelines (with, I might add, no guarantees)???

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Ideas for articles:

Daily Double; no, Triple; no, Quadruple; well, it's up a Whole Lot!

Risk vs. Reward - How you COULD have researched Rambus for yourself and known the stock was WAY undervalued...but you listened to Tom and Sherry, didn't you?

Technical Analysis - How News Events Can Ruin Your Life

or my favorite,

Rambus and Intellectual Property: The New Paradigm in High Growth Companies?

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Am I missing something here, or has The Fool missed the point again, and also the opportunity to get people to think outside the Maker-Breaker box for once?

-JasonX


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