Hager: Update on Rambus

02/07/2003 12:00 am EST


Fred Hager

President, Fredhager.com

In last month's Top Picks for 2003 special report, Fred Hager chose Rambus as his favorite stock for the coming year. His bet was on a favorable resolution to the firm's patent litigation suits. Recent positive news has led to the stock more than doubling from around $7. Despite this strength, the advisor believes this upmove is just the start of better times ahead for the company. Here's his update and review.

"The recent win of Rambus (RMBS NASDAQ) in the United States District Court of Appeals has tremendous implications for Rambus’ shares during the next couple of years. Rambus’ stock price had been crushed because of the erroneous findings in the first trial in the US (Rambus vs. Infineon in Virginia). Since the first trial went against Rambus early in 2001, the NASDAQ went down around 40% while Rambus fell 70%. If Rambus had merely stayed with the NASDAQ, it would be around $24 per share.  

"The Appeal decision confirmed, as we always said, that Rambus did nothing wrong. The Appeals Court found that Rambus did not commit any fraud and that Rambus did not violate disclosure rules. The Appeals Court also threw out the anti-suit injunction against Rambus and the $7 million penalty awarded by the district court against Rambus. The Appeals Court’s decision will affects the firm’s current litigation. I believe the class action lawsuits based on fraud are dead. And the FTC’s seemingly politically-inspired case may continue, but it has been greatly weakened. The new Rambus vs. Infineon trial, on infringement, in Virginia should be won by Rambus.

"Meanwhile, the Micron vs. Rambus trial in Delaware will resume as will the Hynix vs. Rambus trial in California. However, few people realize the pressure that this decision puts on companies to settle with Rambus. If the court decision convinces Rambus’ three foes to settle and sign licenses agreements, Rambus’ share price could easily go to $100 or more."

Note: In the interest of full disclosure, Fred Hager, Fredhager.com, and analyst James Rockwell who contributed to this article all have long positions in Rambus.

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