Chip interface technology and architecture licensing company Rambus Inc. (RMBS) announced that it has signed a licensing agreement with GE Lighting, a unit of General Electric Company’s (GE) Appliances & Lighting business, for the enhancement of LED (light emitting diode) products.
As per the agreement, GE Lighting will license Rambus’ patented processes and technologies for manufacturing its own LED lighting solutions. Rambus’ lighting innovations will therefore enable GE to create a new generation of advanced LED-based lighting products specifically targeted at architectural and commercial applications.
Though financial terms were not disclosed, we believe Rambus is well positioned as a key player to meet the escalating demand for LED lighting technology.
LED as a lighting source has evolved as a substitute for incandescent light sources with proven advantages like lower energy consumption, longer lifetime, smaller size, faster switching, and greater durability and reliability. The major downside to the technology is the significantly higher initial price.
However, the technology continues to evolve, with significant advancements in brightness of the LED devices that would make them all the more suitable for the lighting revolution. Rambus’ entry into this $100 billion LED chip market is an attempt to capitalize on the opportunities that continue to unfold in the LED lighting market.
In keeping with its growth strategy, Rambus had stepped into the Lighting and Display Technology business in 2009, which was a vertical shift influenced by its traditional licensing business.
Notably, Rambus strengthened its new business area with the acquisition of a portion of Uni-Pixel’s intellectual property portfolio in the beginning of the year. The portfolio comprises dynamic backlighting based on Time Multiplexed Optical Shutter (TMOS) display technology. The TMOS display technology can be applied to modern LCD display panels to create more efficient and cost-effective devices.
Rambus also signed an engineering services agreement with Uni-Pixel for future collaboration and technology development. Though we remain encouraged with Rambus’ initiatives in the lighting and display space, we are unable to gauge the monetary benefit due to the absence of disclosure regarding any economic details.
California-based Rambus reported outstanding first-quarter results mainly due to huge amount ($95.9 million) received as compensation in settlement of a dispute with Samsung Electronics.
We believe contract wins, a strong cash position and the absence of debt are positives for Rambus. However, we are a bit concerned about customer concentration risks (since only one company accounted for nearly 85% of first quarter revenue), pending lawsuits against Hynix, Micron Technology Inc. (MU) and NVIDIA Corp. (NVDA), as well as competitive pressure from Samsung Electronics.
We have a short-term Hold recommendation (Zacks #3 Rank) on Rambus shares.
Read the full analyst report on “RMBS”
Read the full analyst report on “GE”
Read the full analyst report on “MU”
Read the full analyst report on “NVDA”
Zacks Investment Research
