Massive restructuring plans are in store for technology
), as it strives to bring down costs and generate positive cash
After a detailed study, Rambus found that cutting down on its
general and administrative expenses would not be too difficult.
This would save approximately $30.0 to $35.0 million of cash
annually. The cost curtailment initiative will reduce headcount by
15%, which will be completed by the fourth quarter of 2012 ending
Rambus expects to take a severance charge (to compensate the
laid-off employees) of roughly $6.0 million over the coming two
Rambus will also be reorganizing its entire business. From now on,
the company will report under three operating units, namely Memory
and Interfaces, Cryptography Research, and Lighting and Display
Technologies. The newly created divisions will be headed by Dr.
Black, Paul Kocher and Jeffery Parker, respectively.
Management appears optimistic that these changes will bring expense
control and the new approach will help Rambus grow in the coming
We look forward to the success of this restructuring, but note that
the continued loss of legal suits to its top customers keeps us
concerned. Last month, Rambus suffered a major setback after three
consecutive loses to semiconductor companies Garmin International
Inc. (a subsidiary of
Moreover, the macro-economic uncertainty is affecting the PC
market, which in turn is taking a toll on semiconductor companies.
The sluggish demand for semiconductors is jeopardizing Rambus'
However, we still believe that there are growth prospects for
Rambus given a slight recovery expected in the back half of 2012.
We also notice that Rambus is doing well in the Lighting and
Display category. In fact, in its second quarter earnings call (in
July), the company mentioned enormous growth prospects in the LED
arena and stated that it is well-positioned to capitalize on the
Currently, Rambus has a Zacks #3 Rank, indicating a short-term
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