SOURCE: Rothman Research

Rothman Research

April 28, 2010 08:40 ET

Hanging in the Balance -- One Win, One More to Go

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 28, 2010) - -- In the game of forecasting earnings, Wall Street is often caught missing its previsions by more or less a few cents. However, when Rambus Inc. (NASDAQ: RMBS) reported its earnings results last week the Street was left flabbergasted and for good cause. Street consensus for Rambus was estimated with revenue of $50 million and profits of $0.06 per share, but the experts' calculus for Rambus earnings omitted one factor of significant proportion -- a pending settlement with Samsung Electronics which the court turned into a victory in favor of Rambus Inc. This update helped propelled what otherwise would have been a trivial result into an investor's symphony; revenue of $161.9 million and profits of $1.28 a share. "Samsung has arranged for payment of $700 million to be made over five years, and the first installment that was included in Rambus first quarter results inflated revenue by 492% as compared to same quarter in 2009. Samsung will also be investing another $200 million in the company as per the legal settlement," commented Mathew Collier of, "this is the same company that reported a loss of $0.17 per share in 2009 for the same quarter." 

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A sense of acute bullishness has taken over the Rambus investors' camp following the court ruling in favor of the company, and the fuel that is now alimenting the rally is the pending $12 billion lawsuit against Micron Technology Inc. (NASDAQ: MU) and Hynix Semiconductor Inc. There is a lot at stake with the Micron and Hynix lawsuit and in this regard experts on the Street are looking at this pending case as a double edge sword that has the potential of inflicting major corrections on the share price. A positive court ruling, better than the Samsung settlement, could see the stock double in price and if for some reasons the ruling fails to deliver in favor of Rambus, the possibilities that the shares of the company could decline close to its 52 weeks lows is real.

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"Has the Samsung agreement sealed the outcome of the litigation between Rambus and other chip makers which have been charged by Rambus of violating its patent... we do not believe so," added Mathew of, "But what it could have opened is an opportunity for partnership just like in the Samsung agreement." 

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