Rambus Inc.
(
RMBS
) kick started the New Year on a highly optimistic note. Recently,
the company announced that it expects to report fourth-quarter
revenue of $83.0 million, well above its previously announced
target of $66.0-$71.0 million, spreading cheer among investors.
Close on the heels of this announcement, Rambus shares climbed
0.12% in after-hour trade, followed by a 7.4% surge in the day's
trade.
We think that the company's decision to raise its revenue
guidance was based on a multi-year licensing deal win last
December. Rambus had signed a 5-year patent licensing agreement
with
Broadcom Corp.
(
BRCM
) for an undisclosed sum.
Broadcom is a fabless semiconductor company and its operations
circle around the broadband, mobile and wireless, as well as
infrastructure and networking verticals. According to a report
published by the U.S. research firm Gartner in April 2011, Broadcom
is now one of the top 10 semiconductor companies in the world.
We believe that the association with Broadcom will support
Rambus' fundamentals in the upcoming quarters. And success at
Broadcom could fetch similar deals from the semiconductor
industry.
Simultaneously, Rambus released Broadcom from all earlier claims
regarding its patented innovations, something that should also
serve as a check on legal costs.
The guidance revision is a big positive for Rambus, particularly
since it lost a significant anti-trust suit to
Micron Technology Inc.
(
MU
) and Hynix Semiconductor Inc. in November. The shares of Rambus
had lost significant value subsequent to the defeat as the negative
outcome blew investor sentiment.
But the recent share price appreciation indicates a change in
investor sentiment. This development notwithstanding, we think that
legal battles will continue to overshadow the company's prospects
and could prove difficult for a company of Rambus' size and
resources.
Rambus holds a Zacks Rank #3, implying a short-term Hold
recommendation.
BROADCOM CORP-A (
BRCM
): Free Stock Analysis Report
MICRON TECH (
MU
): Free Stock Analysis Report
RAMBUS INC (
RMBS
): Free Stock Analysis Report
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