Chip interface technology and architecture company Rambus Inc. (RMBS) has received an assurance from the largest semiconductor manufacturing company Samsung Electronics that the latter will resolve all claims of Rambus relating to the patent on its chip technology used by Samsung in its semiconductor products.

Under the terms of the agreement, Rambus will get an amount of $900 million over a period of five years. The payment schedule is framed in such a way that Samsung will initially invest $200.0 million in Rambus stock, making another payment of $200.0 million and an additional $25.0 million per quarter thereafter for the next five years. This will relieve Samsung of all the patent infringement charges filed by Rambus.

We believe this is a good compensation amount received by Rambus, and will provide some support to the company’s revenue stream over the next few years. Rambus’ charges against other semiconductor companies such as Micron (MU) and Hynix Semiconductor are yet to be resolved.

The company reported mediocre third quarter 2009 results with a net loss per share of 26 cents, worse than the Zacks Consensus Estimate of a net loss per share of 24 cents. This apart, Rambus witnessed a 3.3% sequential improvement in revenue, a decline of 5.3% from the year-ago quarter. The sequential increase may be attributed to higher variable royalty revenue and a year-over-year decline in contract revenue. Slight industry revival, coupled with growth in the company’s target markets, helped the company increase revenues. The company has also provided a decent revenue guidance for the fourth quarter.

For fiscal year 2010, the Zacks Consensus Estimate for Rambus is $4.36, which is a 13.2% increase from the 2009 EPS. The Zacks Consensus Estimate for 2010 is short of the “most recent market consensus estimate” by just 4 cents. The company witnessed a trivial earnings surprise in the October 2009 quarter, and five analysts covering the stock made an upward estimate revision in the last month. Consequently, we expect in-line results and a minimal impact on its share price once the company reports.

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