RMBS: License Renewal & Share Buyback - Analyst Blog

Rambus Inc.(RMBS), announced yesterday, the renewal of its patent licensing agreement with Renesas Electronics Corporation, a company formed through the merger of Renesas Technology Corp. and NEC Electronics Corporation. Per the terms of the agreement, Renesas Electronics can use patented innovations of Rambus in its broad range of logic integrated circuit products.

The same day, Rambus reported the completion of an accelerated share repurchase program announced on August 19, 2010. The company repurchased 4.8 million shares at an average price of $18.88 totaling approximately $90 million.

The accelerated repurchase agreement is a part of Rambus' 9.5 million share repurchase program authorized by its Board of Directors previously. As of December 21, 2010, the company had repurchased roughly 9.5 million shares at an average price of $20.48 and was left with roughly 5.2 million shares under the authorization.

California-based Rambus designs, develops, and licenses chip interface technologies and architectures that are used in digital electronics products. The company reported an uninteresting third quarter and missed the Zacks Estimates on both the top and bottom lines.

Recently, the company revised its fourth quarter revenue guidance to range within $85-$93 million versus its prior forecast of $40-$50 million. The revision was due to an estimated $180 million royalty payment from the Elpida agreement over the next five years.

Despite the positive revision, we believe that higher operating expenses will act as an impediment to growth in the quarters ahead, badly impacting financial results. However, Rambus' endeavor to diversify into the lighting and display technology space in an effort to grab the tremendous opportunity of solid state lighting is encouraging.

We believe Rambus is well positioned as a key player to meet the escalating demand for LED lighting technology aided by its tie-up with GE Lighting, a unit of General Electric Company's (GE) Appliances & Lighting business.

We currently have a Neutral recommendation on the stock.

 
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